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Item 6B MXD Retail Market Analysis Final ReportRetail Analysis Study Final Report •.0 __ - � ._ '," � �� • � LV% Vl�[�-Mqw% p STRATEGISTS �V DEVELOPMENT STRATEGISTS 1.0 INTRODUCTION & EXECUTIVE SUMMARY 1 5.0 CHANGING NATURE OF RETAIL 93 1.1 Scope of Study & Project Background 1 5.1 Retail & Lifestyle 94 1.2 Report Structure 1 5.2 Restaurants & Entertainment 96 1.3 Executive Summary 2 6.0 RECOMMENDATIONS 97 2.0 REGIONAL & LOCAL OVERVIEW 9 6.1 Introduction 98 2.1 Regional Market Overview 10 6.2 Full-service & Limited -service Restaurants 100 2.2 Tarrant County Overview 14 6.3 Specialty Grocery 102 2.3 Southlake Overview 19 6.4 Health, Beauty & Wellness 104 2.4 Southlake 2030 Goals and Objectives 21 6.5 House & Home 106 2.5 Southlake 2030 Airport Compatible Land Uses 25 6.6 Culinary Hub 108 2.6 Residential Development in Southlake 26 6.7 Performing Arts Venue & Entertainment Center 110 2.7 DFW & Southlake Tourism Overview 29 6.8 Medical/Wellness Hub 113 6.9 Campus Office (build -to -suit) 115 3.0 RETAIL ANALYSIS 32 6.10 Suburban Multi -Tenant Garden Office 117 3.1 DFW Retail Market Overview 33 6.11 Top 5 Priority Policy Recommendations 119 3.2 Competitive Retail Developments 44 3.3 Southlake Retail Market Overview 48 APPENDICES 126 3.4 Southlake Retail Analysis & Demand 62 Appendix A - Commercial Development Incentive Case Studies 126 3.5 Implications 78 Appendix B - Nordstrom Store Location Analysis 131 Appendix C - Tenant Void Analysis 142 4.0 OFFICE ANALYSIS 80 4.1 DFW Office Market Overview 81 4.2 Mid -Cities Sub -Market Office Overview 85 4.3 Southlake Office Overview 87 4.4 Southlake Office Demand 90 4.5 Implications 92 LIST OF FIGURES Figure 1.1 Southlake Recommendation Model Figure 2.1 Unemployment Rate - DFW Metroplex vs. US Figure 2.2 Dallas -Fort Worth -Arlington MSA Population Projections Figure 2.3 Tarrant County Population and Household Projections Figure 2.4 Tarrant County Population Distribution by Age Cohort Figure 2.5 Tarrant County Ethnic Distribution Figure 2.6 Tarrant County Income Brackets Figure 2.7 Southlake 2030 Consolidated Future Land Use Plan Figure 2.8 Consolidated Land Use Plan Percentage Area Distribution by 7 10 13 15 16 17 18 23 24 27 30 31 35 36 49 54 55 56 57 60 61 63 64 65 66 67 68 69 70 71 72 75 DEVELOPMENT STRATEGISTS Figure 4.1 Land Use Category Figure 2.9 Southlake New Residential Development Figure 2.10 Major Tourism Attractions Near Southlake Figure 2.11 Hospitality Employer Density Heat Map in the DFW Region Figure 3.1 DFW Retail Market by Classification Figure 3.2 DFW Major Regional Retail Centers Figure 3.3 Southlake Major Organized Retail Figure 3.4 Southlake Major Retail Planned/Under Development Map Figure 3.5 Southlake Major Retail Planned/Under Development Chart Figure 3.6 Kimball Park Site Plan Figure 3.7 Kimball Oaks Site Plan Figure 3.8 Carillon Site Plan Figure 3.9 Britton Property Site Plans Figure 3.10 Southlake Retail SWOT Analysis Figure 3.11 Southlake 2013 Citizen Survey Figure 3.12 Stakeholder Survey Figure 3.13 Drive Time Analysis Figure 3.14 Suburban Multi -Tenant Garden Office Locations Trade Area Delineation - Primary and Secondary Trade Areas Figure 3.15 2014 Household Expenditure Indexed to USA Average Figure 3.16 Primary Trade Area Household Expenditure 2015, 2025 & 2035 Figure 3.17 Secondary Trade Area Household Expenditure 2015, 2025 & 2035 Figure 3.18 Organized Retail Per Capita Figure 3.19 Organized Retail Per Capita - PTA Excluding Southlake Figure 3.20 Retail Inventory vs. Spending 7 10 13 15 16 17 18 23 24 27 30 31 35 36 49 54 55 56 57 60 61 63 64 65 66 67 68 69 70 71 72 75 DEVELOPMENT STRATEGISTS Figure 4.1 DFW, Texas, and National Unemployment Rates Figure 4.2 DFW CBD & Suburban Office Sub -Markets Figure 4.3 Dallas Sub -Market Office Inventory (in sq. ft.) Figure 4.4 Fort Worth Sub -Market Office Inventory (in sq. ft.) Figure 4.5 DFW Asset Classes by Area (in sq. ft.) Figure 4.6 DFW Dallas Sub -Market Office Vacancy Rate Figure 4.7 Fort Worth Sub -Market Office Vacancy Rate Figure 4.8 Mid -Cities Office Absorption Rate Figure 6.1 Southlake Recommendation Model Figure 6.2 Full-service & Limited -service Restaurant Locations Figure 6.3 Specialty Grocery Locations Figure 6.4 Health, Beauty & Wellness Locations Figure 6.5 House & Home Locations Figure 6.6 Culinary Hub Locations Figure 6.7 Performing Arts Venue & Entertainment Center Locations Figure 6.8 Medical / Wellness Hub Locations Figure 6.9 Campus Office (Build -to -Suit) Locations Figure 6.10 Suburban Multi -Tenant Garden Office Locations 81 82 83 83 83 84 84 90 99 101 103 105 107 109 112 114 116 118 DEVELOPMENT STRATEGISTS LIST OF TABLES Table 2.1 DFW Major Industry Sectors 12 Table 2.2 City of Southlake Population by Age 19 Table 2.3 Southlake Population Density 26 Table 2.4 New Residential Development 28 Table 2.5 Drive Times to DFW Metroplex 29 Table 3.1 DFW Major Regional Retail Centers 37 Table 3.2 Mid -Cities in DFW Market Overview 48 Table 3.3 Southlake Major Organized Retail 50 Table 3.4 Trade Area Household Forecast 73 Table 3.5 Trade Area Retail Demand - 2015 74 Table 3.6 Trade Area Projected Retail Demand - 2025 76 Table 3.7 Lifestyle Center Example Development 77 Table 4.1 DFW Office Market Summary Q1 2014 82 Table 4.2 Mid -Cities Office Market Summary Q1 2014 85 Table 4.3 Southlake Office Leasing Market Summary 89 Table 4.4 Mid -Cities Office Absorption Rate 91 Table 4.5 Southlake Office Demand Model 91 Table 6.1 Approvals Process Incentives 124 Table 6.2 Project Cost Incentives 125 mm,.-O� DEVELOPMENT STRATEGISTS 1.0 Introduction & Executive Summary 1.1 SCOPE OF STUDY & PROJECT BACKGROUND MXD Development Strategists Ltd. of Vancouver, Canada ("MXD") was commissioned by the City of Southlake in March 2014 to conduct a Retail Analysis and Saturation Study for the City of Southlake. City Council had directed staff to conduct a Retail Analysis (Saturation) Study to help determine the likely future retail market conditions in the City given changing demographics, shifting development patterns, emerging shopping trends and competition. 1.2 REPORT STRUCTURE MXD conducted research between April 2014 and July 2014, to gain a firm understanding of the existing retail, office, economic and real estate market conditions in the Southlake area and DFW Metroplex. The purpose of this research was to understand what is the reasonable amount of retail (square footage) the City can support by types given future market and demographic trends, future shopping habits and expectations as well as competition. Furthermore, what types of retail are under- served in the City, what is the trade area served by various categories of retail, and what types of retail are supportable long term and should be attracted (target retail)? As the project moved through its different phases, the purpose and goals slightly shifted due to initial findings and results of the study. 'Papa M, DEVELOPMENT STRATEGISTS To respond to the work program process, this report is presented in the following sections: • Section 1 — Introduction: Introduces the study process and structure. • Section 2 — Regional and Local Overview: A brief synopsis of overall market conditions and performance benchmarks in the DFW Metroplex and the City of Southlake. • Section 3 — Retail Analysis: Assesses and documents the local and regional existing/planned retail supply, performance metrics and full retail demand scenario. • Section 4 — Office Analysis: Assesses and documents the local and regional existing/planned office supply, performance metrics and full office demand scenario. • Section 5 - Changing Nature of Retail: A review of the shifting retail landscape affected by demographic and development changes. • Section 6 — Recommendations: Final land -use and policy recommendations. • Appendix A — Commercial Development Incentive Case Studies. • Appendix B— Nordstrom Store Location Analysis 0 Appendix C —Tenant Void Analysis 1.0 Introduction & Executive Summary 1.3 EXECUTIVE SUMMARY Introduction The objective of this study is to determine the likely future retail market conditions in the City of Southlake given changing demographics, shifting development patterns, emerging shopping trends and competition. To fulfill this primary objective, MXD performed a retail supply and demand analysis, among other analyses, to come to a conclusion and recommendations. To shed light on the City of Southlake and its retail environment, a regional and local overview was conducted to understand the spatial setting and demographic shifts occurring in the DFW Metroplex. The Metroplex is a forward - thinking innovation hub with a population of 6.8 million residents in 2013. It has the world's fourth busiest airport in terms of passenger traffic, DFW International Airport, which is located in close proximity to the City of Southlake. The Metroplex has come out of the economic downturn in a strong fashion, with an expanding economy projected to grow at 3.1% in 2014. The City of Southlake is primarily located in Tarrant County, which had a population of over 1.9 million residents as of 2013, a 25% population increase over the past decade, which makes the County one of the fastest growing urban counties in the United States. It is expected that the largest population age bracket to increase will be those over the age of 65 years old, displaying a gradually aging population. 'PAP iVI�V DEVELOPMENT STRATEGISTS The median household income in 2013 for Tarrant County was $54,442, while the per capita annual income was $27,978, both numbers are significantly lower than that of Southlake which has median household income of $174,179. Southlake has the highest per capita income in the U.S. with a population over 20,000 residents. The City of Southlake has a population of 27,425 residents as of March 2014, spread among 8,514 households. The City has a projected build -out population of 34,118 residents. Southlake has a predominantly youthful population, compared to Tarrant County and U.S. Averages, with much of its population between the ages of 10-64 years old. Statistics display that many young wealthy families move to Southlake to take advantage of the excellent school district, safe neighborhoods, and excellent amenity package that the City offers for growing families. There is an average of 3.22 people per household in Southlake, much higher compared to the 2.58 U.S. average. Southlake's residential density pattern is characterized by low-density single family homes, fostering an auto -oriented development environment. Projects such as Southlake Town Square have attempted to mitigate auto -dependency by building more pedestrian oriented designs 1.0 Introduction & Executive Summary Retail Analysis The retail sector in the DFW Metroplex continues to expand and perform well. It has experienced the highest occupancy rates since pre -recession thanks to modest new construction which has allowed to already -constructed vacant spaces to be leased out. Retail space availability continues to shrink and retail occupancy was at 90% in Q1 2014. The biggest retail driver in the Metroplex continues to be grocery stores and alternative tenants including medical uses, entertainment, culinary, and fitness centers. Neighborhood centers constitute the largest organized retail development classification in the Metroplex at 24%, followed by community centers at 15%, and regional malls at 13%. While lifestyle centers are becoming more popular, they still only make up 2% of the retail development mix. The majority of major regional retail projects are still enclosed malls, as the top fifteen largest retail centers are all enclosed centers. The closest major regional mall to Southlake is Northeast Mall in Hurst. It is the second largest mall in the Metroplex and has a strong retail mix including anchors such as Nordstrom and Macy's. 'PAP iVI�V DEVELOPMENT STRATEGISTS Southlake has strived for luxury retail tenants to locate in the City, especially in projects such as Southlake Town Square, however the luxury cluster of Highland Park Village and and NorthPark Center have created the "go to" place for luxury shopping with exclusive tenants such as Chanel, Jimmy Choo, Zegna and St. John. For new luxury tenants entering the Texas market, Highland Park Village and NorthPark Center will be the first and second choice when looking for leasable space. Retail in communities surrounding Southlake such as Grapevine, Colleyville, Trophy Club and Keller are oriented towards neighborhood commercial, strip retail, power center and big box formats. Only a select few projects such as the Village at Colleyville are able to compete with the strong retail architectural format that the City of Southlake has created. The City of Southlake has created a retail environment that has drawn shoppers from surrounding communities to spend shopping dollars in its retail projects, however competitive retail developments are beginning to emerge in these surrounding communities as their retail offering matures. Projects such as Entrada (Westlake), Colleyville Downs (Colleyville), Alliance Town Center (Fort Worth), and Circle T Ranch (Westlake) will all be major competitors to the offering in Southlake. 1.0 Introduction & Executive Summary Viewing Southlake's retail market, the largest retail draw is Southlake Town Square which not only acts as a regional lifestyle retail destination, but also a Town Center and Central Business District. Other major retail offerings include the Shops of Southlake, Gateway Plaza, and the under construction Park Village. Southlake has approximately 2.8 million square feet of organized retail space in the city, and is primarily clustered along Southlake Boulevard. The retail in the city has a high architectural standard and almost all developments use material such as brick, stone, true stucco, and other upscale features. Southlake has a focus towards regional and national retail chains, and currently has a lack of a local, independent retail base. One reason for this is due to its higher than average lease rates in its more popular retail projects. The Southlake retail market is performing quite well nonetheless, the approximate vacancy rate as of April 2014 is at 6%. Although it is typical to construct new retail when vacancy rates are below 10%, Southlake has other factors that affect its retail future. There is approximately 320,000 square feet of retail under construction in Southlake currently, with another 710,000 square feet planned for the future (both entitled and non - entitled). This includes Carillon, which has 40 acres of land planned and entitled for retail, but has had difficulty in getting the commercial portion off the ground. 'PAP iVI�V DEVELOPMENT STRATEGISTS A 2013 Citizen Survey completed by the City of Southlake, and a 2014 Stakeholder Survey completed by MXD provided similar findings. Popular responses based around the retail offering in Southlake stated that residents were "happy with what we have" currently, while stakeholders noted that they saw Southlake as an "over retailed environment". Both surveys stated that they felt there was a lack of commercial offering outside of retail, such as restaurants / culinary, entertainment, performing arts, etc. Upon completing a Drive Time Analysis and dilineating Primary (PTA) and Secondary Trade Areas (STA) for the Southlake retail market, MXD analyzed the current supply and future retail demand. To begin to form an understanding of whether the City of Southlake has or is near a retail saturation point, it was found that the City of Southlake has more than four times the U.S. average of organized retail per capita on a square foot basis. Southlake has 103 square feet of retail per resident, compared to a Texas average of 24 square feet per capita, while U.S. urban areas typically have forty to sixty square feet of retail per capita as they draw from more rural areas. Matching this figure, the Primary Trade Area excluding Southlake has a retail per capita of only 41 square feet. 121 1.0 Introduction & Executive Summary Running MXD's retail model, it was found that the amount of Supportable Retail Inventory in the PTA based on spending (retail demand) in 2014 is 5,994,775 square feet. The amount of Retail Inventory in the PTA (retail supply) in 2014 is 6,497,106 square feet. Applying the Mid -Cities 7% retail vacancy rate, the amount of Occupied Retail Inventory in the PTA (retail supply) in 2014, it is calculated that there is approximately 6,042,309 square feet of retail (supply) currently occupied. With Supply and Demand being very similar, 6,042,309 square feet versus 5,994,775 square feet, this demonstrates that the PTA, especially the City of Southlake is currently at a retail saturation point. Consistent population growth in the PTA will need to occur to allow for the retail inventory to remain sustainable as new retail projects come to fruition in the PTA (which includes cities such as Westlake, Trophy Club, and parts of Keller and Colleyville, etc.) Delving further into understanding Southlake's current retail climate shows that Southlake has almost half of the PTA's organized retail inventory, but only 21% of the retail spending dollars are coming from within the city's boundaries. This means that 79% of the retail spending in the PTA is coming from outside of Southlake. As surrounding cities retail inventory become more mature, there is a risk that in -flow spending from these cities will decrease into Southlake. Large projects such as Entrada and Circle T Ranch, along with expansion in Colleyville will intercept consumers that now travel to Southlake. 'Papa M, DEVELOPMENT STRATEGISTS The study also looked at future retail demand over a ten year window. The amount of Supportable Retail Inventory in the PTA based on spending (retail demand) in 2025 is forecast 7,666,794 square feet. This creates a demand of 1,672,019 square feet of new retail space between 2015 to 2025 in the PTA. If Southlake maintains their 43% retail inventory allocation and annual retail spend, the City could potentially absorb 718,698 square feet of retail space by 2025. Due to Southlake's build -out of approximately 34,000 residents, the population growth and retail spend in later years will need to inflow from outside of the city's boundaries for space to be sustainably absorbed. This implies that Southlake retail is approaching the retail saturation point and diminishing returns/patronage will result with an expanded retail base (exclusive of certain retail categories). The result from "more of the same" would lead to higher vacancy, lower lease rates, higher tenant turnover, and sales cannibalization between the various projects. There will be future opportunities for retail expansion in Southlake if constructed in a strategic manner that focuses on niche opportunity retail categories. Retail opportunities to expand into in the coming years include full-service and limited -service restaurants, home furnishings & accessories, and health & beauty. 1.0 Introduction & Executive Summary Office Analysis Due to a reduced future demand for retail development in the City of Southlake, MXD also completed an office analysis to understand whether office space or other land uses would be appropriate in place of retail moving forward. The Mid -Cities office market has struggled over recent years, it currently has a 22% vacancy rate, and its average lease rates are below the DFW Metroplex average. Absorption of office space has also been low over the last several years. The City of Southlake has 3.3 million square feet of office space as of May 2014. Most of Southlake's office space is located adjacent to Hwy 114, north of Ira E Woods Avenue in the eastern quadrant of the city, TW King Road, and along Southlake Boulevard and in Southlake Town Square. Office space above retail in mixed-use buildings in Southlake Town Square have the city's highest office lease rates. They are seen as highly desirable offices with a strong amenity package. Office space in Industrial Flex buildings have the lowest lease rates in Southlake, however they are much more basic in their fit -out and their amenity packages are much lower than in Town Square. Small offices located in plazas, office parks, and free-standing buildings lease at rates in line the DFW average. 'Papa M, DEVELOPMENT STRATEGISTS The Southlake vacancy rate as of May 2014 stands at approximately 19% with 620,000 square feet of space. Removing the 380,000 square foot 1 Kirkwood building reduces the vacancy rate to approximately 8.5%, displaying the effect the Kirkwood building has on the office market. Although an 8.5% vacancy rate is quite healthy for a suburban office market, the limited absorption over the past eight years in the Mid -Cities region tempers the amount of space required for future demand, not only in Southlake, but the Mid -Cities as a whole. The MXD office demand model employs two methods to arrive at its final number, historic annual market absorption and projected employment office demand. By using methods that investigate both the past and future, the office model is able to provide more accuracy moving forward. Between 2014 and 2025, it is projected that there will be a cumulative demand of 404,541 square feet of office space within the City of Southlake. With several projects currently under construction or receiving entitlement, the majority of demand over the next several years will be absorbed by these developments. The focus in Southlake moving forward should be towards "quality over quantity" with incremental growth of the multi -tenant garden -style office, and large scale built -to -suit campus offices for tenants looking at making Southlake their long-term home such as what has occurred with Sabre. Southlake Residents Full-service & Limited -service Restaurants Health, Beauty & Wellness Specialty Grocery House & Home retail Culinary Hub L A Office/Daytime Full-service & Limited -service Restaurants Specialty Grocery Campus Office (Build -to -suit) Suburban multi -tenant garden office Medical/Wellness Hub Regional/Destination Full-service & Limited -service Restaurants House & Home retail Culinary Hub Performing Arts Venue & Entertainment Center Medical/Wellness Hub _ 1.0 Introduction & Executive Summary The top five priority policy and development recommendations are as follows: 1. Reduce cannibalization of tenants between Southlake's retail properties by slowing the growth of new retail developments in the City, while ensuring older retail properties maintain low vacancies. "Quality over Quantity of Tenants". 2. Focus on creating a niche destination project on the Carillon site, which may include less retail than was originally planned. 3. Introduce more unique independent restaurants to the Southlake market through "culinary clusters". 4. Work with commercial developers to allow more flexibility with plans while still maintaining a high level of urban design standards to ensure that the constantly shifting demands from retail, office, etc. are being met. 5. Create a standard incentive structure that is transparent to the commercial development community. 'PAPM"O DEVELOPMENT STRATEGISTS 8 mm,.-O� DEVELOPMENT STRATEGISTS 2.0 Regional & Local Overview 2.1 REGIONAL MARKET OVERVIEW The City of Southlake is located in the Dallas -Fort Worth (DFW) Metroplex, the hub of Northern Texas which has a population of 6.8 million residents in 201, the fourth largest metro area in the United States. The region is a forward - thinking innovation hub that presents a strong business climate and economy, high quality of life, skilled and highly educated labor force, and a relatively low cost of living. The Metroplex is characterized as a major international gateway with the world's 41" busiest airport, DFW International Airport, and the world's first fully -industrial airport, Fort Worth Alliance Airport. There is a strong business climate, the region serves as a major corporate headquarters destination and there are 18 Fortune S00 companies in the Metroplex as of 2013. While the entire United States faced an economic downturn in 2008, DFW did not feel the effects of the Great Recession as strongly as many other regions in the nation and was one of the first metro areas to recover. The region saw a "Return to Peak Employment" by 2012 according to industry tracked data from IHS, an industry data supplier. The unemployment rate was 5.3% at the end of Q1 2014, as seen in Figure 2.1, and is expected to decline to 5.2% by the end of 2014. With an expanding economy, 3.4% in 2013, 97,000 new jobs were created in the Metroplex between 2012 and 2013, and job growth is projected to stay steady at 3.1% in 2014. DEVELOPMENT STRATEGISTS Figure 2.1 Unemployment Rate - DFW Metroplex vs. US 12.0% 10.0% 8.0% 6.0% 4.0% 2.0% 0.0% 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 --S--DFW Metroplex 410—United States Source: U.S. Department of Labor: Bureau of Labor Statistics, CBRE 10 2.0 Regional & Local Overview The State of Texas and the DFW region are continually at the top of many national rankings. These rankings include, but are not limited to: ■ Texas ranked #1 Top State for Doing Business (CNBC, 2012) ■ Texas ranked #2 State for Technology (CNBC, 2012) ■ Dallas named the Top City in the Country to find Tech Professionals (Kforce, 2013) ■ DFW region ranked #2 in the Nation for Small Business (Thumbtack.com, 2012) ■ Dallas area leads Nation in Population Growth in 2012 (Dallas Regional Chamber, 2012) ■ DFW region is #S in Nation where a 'Paycheck Stretches the Furthest' (Forbes, 2012) �DLVLL®PMLNT STRATEGISTS t" -t a ! JL _ _ 2.0 Regional & Local Overview 'Papai ,-00 ' DEVELOPMENT STRATEGISTS Top industries in the DFW region that have been on the rise and seen strong job growth over the past three years include: ■ Oil & Gas Extraction (+23%) ■ Support Activities for Mining (+82%) ■ Machinery, Equipment, and Supplies Merchant Wholesalers (+17%) ■ Activities related to Credit Intermediation (+33%) ■ Agencies, Brokerages, and other Insurance related activities (+14%) ■ Computer System Design and Related Services (+31%) ■ Management, Scientific, and Technical Consulting Services (+15%) ■ Office Administrative Services (+20%) ■ Business Support Services (+18%) (Source: EMSI) The DFW Regional Workforce Leadership Council is placing focus on five major industry sectors that are already well established in the region and are targeted for growth moving forwards: Table 2.1 DFW Major Industry Sectors Employers 5,239 101715 916 Employees 213,940 271,540 209,380 Source: DFW Regional Workforce Leadership Council 2013 Report 21000 11803 269,460 166,590 2.0 Regional & Local Overview "PAP 0 DFS/FLOPMENT STPATFGISTS Texas saw a population increase of more than 1.3 million residents between 2010 and 2013, which is significantly more than any other state according to the U.S. Census Bureau. Estimates show that most of the nation's growth moving forward will be in the southern and western states, including Texas, although growth across the entire country is beginning to slow in comparison to the previous decade. Most of Texas' growth will occur in urban metro locations such as Dallas/Fort Worth, Houston, Austin, San Antonio, EI Paso, and the Rio Grande Valley. With continued population growth in these metropolitan areas, necessary infrastructure will need to be provided to accommodate new residents such as transportation and utilities, along with new jobs, housing. New retail shopping, services, office, and hotels will also need to be considered as population grows. Figure 2.2 Dallas -Fort Worth -Arlington MSA Population Projections 20,000,000 18,000,000 16,000,000 14,000,000 0 12,000,000 0 10,000,000 `—° 8,000,000 CL a 6,000,000 4,000,000 2,000,000 0 2015 2017 2019 2021 2023 2025 2027 2029 2031 2033 2035 2037 2039 —Low Growth Rate Medium Growth Rate High Growth Rate Source: Texas State Data Center Projections, 2012 13 _ 2.0 Regional & Local Overview 2.2 TARRANT COUNTY OVERVIEW Southlake is primarily located in Tarrant County, with a small portion of the City within Denton County. The Tarrant County population is 1,911,917 residents as of 2013, which is a 25.1% population increase over the past decade. This makes Tarrant County one of the fastest growing urban counties in the US today,. The county is projected to grow in population to 2,065,144 residents by 2018, representing a change of 8.0%, much higher than the US average population growth rate. There are 651,877 households in Tarrant County with an average of 2.75 persons per household. This is slightly higher than the US average of 2.58 persons per household according to the US Census. 27.5% of the population is below 18 years of age, and 9.6% of the population is above 65 years of age, as of 2012. It is expected that the largest increase in residential population will be those over 65 years of age. There is a projected 30.5 % increase in the 65 to 74 year-old age bracket from 2013 to 2018. Due to the gradually aging population, the median age in Tarrant County is projected to slightly increase from 32.3 in 2000 to 33.0 in 2018. Vl� ' P STRATEGISTS �Aww 1111111111110A _ 2.0 Regional & Local Overview Figure 2.3 Tarrant County Population and Household Projections Households Population 'Papai ,-00 ' DEVELOPMENT STRATLGISTS 500,000 1,000,000 1,500,000 2,000,000 Source: Workforce Solutions for North Central Texas 2,500,000 ■ 2000 ■ 2010 ■ 2013 2018 15 _ 2.0 Regional & Local Overview Figure 2.4 Tarrant County Population Distribution by Age Cohort 350,000 300,000 250,000 150,000 100,000 50,000 He Vl�[�-Mqw% P STRATEGISTS 0 to 4 5 to 14 15 to 19 20 to 24 25 to 34 35 to 44 45 to 54 55 to 64 65 to 74 75+ Source: Workforce Solutions for North Central Texas 2000 2010 ■ 2013 2018 16 2.0 Regional & Local Overview �DLVLLOPMLNT STRATEGISTS In 2013, the predominant ethnic category for Tarrant County is Caucasian, with just over 65% of residents viewed as Caucasian. There is an increasing amount of Hispanic population, especially among youth. The Hispanic population has grown from 19% in 2000, to a projection of nearly 30% by 2018. The homeownership rate from 2008 to 2012 was 62.3%, and the median value of owner -occupied housing units is $136,300. This ranks Tarrant County as one of the more affordable urban communities in the US according to Workforce Solutions for North Central Texas. Further, apartment vacancies, rent cost and home values have been stable and have not seen any large drops or increases. Figure 2.5 Tarrant County Ethnic Distribution Hispanic Other or Multi Race Asian Pac Isldr wow 2000 2010 American Indian or Alaska Native ■ 2013 2018 Black White 0% 10% 20% 30% 40% 50% 60% 70% 80% Source: Workforce Solutions for North Central Texas 17 2.0 Regional & Local Overview The median household income in Tarrant County in 2013 was $54,442, while the per capita annual income was $27,978. Per capita income is expected to increase, with a projected rise of 13.6% from 2013 to 2018. As displayed in Figure 2.7, the predominant household income category in 2013 was $50,000 to $75,000, while the income group least represented was $150,000+. These income brackets are quite different than the City of Southlake's. As of 2013, 20.2% of residents hold a Bachelor's Degree, lower than 31.7% educational attainment of the United States for those over the age of 25. In relation to the economy, unemployment is projected to decrease in Tarrant County by 12.9% from 2013 to 2018. The major economic drivers include cattle and agriculture, aerospace companies and defense contractors. The county is seeing a shift from the historic cattle ranches it has always been known for, towards a more diversified mix of market sectors. 'PAPM"�0 DEVELOPMENT STRATEGISTS Figure 2.6 Tarrant County Income Brackets, 2013 140,000 120,000 100,000 80,000 60,000 40,000 20,000 0 Under $15K- $25K- $35K- $50K- $75K- $100K - $150K + $15K $25K $35K $50K $75K $100K $150K As of 2011, there were 37,210 businesses located in the county, and 687,510 workers were employed as of 2012, a Source: Workforce Solutions for North Central Texas 2.3% increase from 2010. The retail sales per capita, as of 2007, was $14,582. 18 _ 2.0 Regional & Local Overview '%� Ar i�71001%6 'Papa M,-,O� DEVELOPMENT STRATLGISTS 2.3 SOUTHLAKE OVERVIEW Having established an understanding of the DFW region and Tarrant County, the analysis now switches to the Southlake local area. The City of Southlake is seen as an affluent suburb of both Dallas and Fort Worth, located in the Mid -Cities of the DFW Metroplex. The City currently has a population of 27,425 residents as of March 2014, and there were 8,514 households. While population has been continually expanding in the city over the past several decades, there are signs of a slowdown approaching as the projected build -out population is 34,118 residents. As displayed in Figure 3.1, Southlake has a higher percentage of 10-19 year olds and a lower percentage of 65+ compared to the U.S. Average. This exhibits that there are more young families with school aged children residing in Southlake than in most other municipalities, however once the children grow -up and leave the home, residents are likely to move out of Southlake, which is why there is such as a low 65+ population today. There is an average of 3.22 people per household compared to 2.58 U.S. Average, which correlates with the higher amount of families, and lower amount of "empty -nest" seniors. 68% of residents 25 years and older have a bachelor's degree or higher, a dramatic rise over the 20.2% in Tarrant County. The 2013 median household income for Southlake was $174,179. The City has the highest per capita income in the country for cities with a population over 20,000 residents, displaying its wealth and spending power. High per capita incomes has also translated to relatively high home prices, with the a 2013 average home sales price of $643,334. Table 2.2 City of Southlake Population by Age City of Southlake US Census Average Under 10 years old 10-19 years old 20-64 years old 65 years and older Source: 2010 US Census, City of Southlake Fast Facts 14.37% 21.48% 57.51% 6.64% 14.10% 14.50 59.00% 12.40% _ 2.0 Regional & Local Overview Southlake Town Square is seen as the heart of the City of Southlake since it opened in 1999. Town Square and its surrounding retail complexes such as the Shops of Southlake are the primary commercial core for residents of Southlake. There are approximately 115,860 people living within a five - mile radius of Southlake Town Square. In comparison, typical American suburban shopping centers have an average of 150,000 people residing within five miles of their location, due to higher density development. Lower population density can lead to more reliance on shoppers from outside the city to capture spending dollars. %� Ar [�-Mqw% � M,0 �DLVLL®PMLNT STRATEGISTS EM,0�0 2.0 Regional & Local Overview L)EVEL©PMENT STRATEGISTS 2.4 SOUTHLAKE 2030 GOALS AND OBJECTIVES GOAL 1: QUALITY DEVELOPMENT ■ Promote quality development that is consistent with the Urban Design Plan, well-maintained, attractive, pedestrian -friendly, safe, contributes to an overall sense of place and meet the needs of a vibrant and diverse community. GOAL 2: BALANCE ■ Maintain a balanced approach to growth and development in order to preserve the City's assets and fiscal health. GOAL 3: MOBILITY ■ Develop an innovative mobility system that provides for the safe, convenient, efficient movement of people and goods, reduces traffic congestion, and promotes energy and transportation efficiency. GOAL 4: PARKS, RECREATION AND OPEN SPACE ■ Support a comprehensive integrated parks, recreation and open space system for all ages that creates value and promotes natural assets of the City. GOAL 5: PUBLIC SAFETY ■ Establish and maintain protective measures and policies that reduce danger, risk or injury to property and individuals who live, work or visit the City. Source: City of Southlake Consolidated Future Land Use Plan 2.0 Regional & Local Overview GOAL 6: ECONOMIC DEVELOPMENT ■ Create a diversified, vibrant and sustainable economy through the attraction and support of business enterprises and tourism meeting the vision and standards desired by City leaders. GOAL 7: SUSTAINABILITY ■ Encourage the conservation, protection, enhancement and proper management of the natural and built environment. GOAL 8: COMMUNITY FACILITIES ■ Plan and provide quality community facilities and services that effectively meet the service needs of Southlake's residents and businesses. GOAL 9: PARTNERSHIPS ■ Fully utilize and coordinate with the City's many partners to address issues facing the area, provide services and facilities, promote volunteerism, support events and programs and encourage economic growth. GOAL 10: INFRASTRUCTURE ■ Through sound management and strategic investment, develop, maintain, improve and operate public infrastructure that promotes health, safety and an enhanced quality of life for all members of the community. 'Papa M, DLVLL©PMLNT STRATLGISTS Source: City of Southlake Consolidated Future Land Use Plan 22 2.0 Regional & Local Overview Figure 2.7 Southlake 2030 Consolidated Future Land Use Plan , IL 1 �fi �5 I 7„ x "x 1 n: I •..� :4: _ _ J ° e I e� l piVl� 'DLdLL®PMLNT STRATEGISTS Southlake 2030 Plan Future Land Use Plan nsdidated Unde"ing Land Use Designations Ordmm,m 1D22 Approved hiarah 20 2012 Legend Future Land Use Categories 1 DD -Year FIca6 Pla�l - cups of Engneers Paop ry - Pubrc PULOpen Space - Pubw5eml-pulY.1c LDm Dersrry Residential Medhrn Densuy Reslaenilal 011Ice Comm emdal - Retail Con'rn°eroal - Mlxed Use - Town Ceriter - Reglonai RRe13l Inftstridi Small Area Plan Sftm We Specmc Plan Areas 5 Notes, LLJ atly4aga.il.r.i J trm� !-�6LI Bwb-Moi, arm..e.q �v.a rrr, 'wydre Hrne.v �a�. la!C. r�Fs.�a -9tMrt2 13SOOTHLAKE wr+r m s�[a,n-6ra k�[xoaa�w'n t�rc� rway.c•w Source: City of Southlake Consolidated Future Land Use Plan 23 2.0 Regional & Local Overview Figure 2.8 Consolidated Land Use Plan Percentage Area Distribution by Land Use Category Regional Retail Inle,,I,,,I-,,,, 1 acre 1% Developed 116 acres. Retail Commercial Undeveloped 56 acres 23% Developed 190 acres 77% Undeveloped 30 acres 17% Town Center 100 -Year Flood Plain 4% Town Center Retail Commercial 1% 296 Regional Retail �t 1% Public/Semi-Public 5% PublicPark/Open Space 4% Office Commercial 3% Undeveloped 141 acres 35% Corps Engineers Industrial Property 3% -- Industrial Mixed Use 9% Residential 33% Public/Semi-Public Undeveloped - 23 acres 4% to Developed 621 acres 96% �%� Ar [�—Mqw% M,0 DEVELOPMENT STRATEGISTS Medium Density Residential Undevelope 384 acres 11% Office Commercial Undeveloped 118 acres 35% 111III � � � � � � � � � � � � � &L, Developed 3,176 acres 89% Low Density Residential Undeveloped 533 acres 13% Developed 3,626 acres 87% Mixed Use Undeveloped 653 acres 59% eveloped 445 acres 41% Source: City of Southloke Bond Rating Presentation 2014 24 2.0 Regional & Local Overview 2.5 SOUTHLAKE 2030 AIRPORT COMPATIBLE LAND USES ■ There are development limitations in certain areas of the City of Southlake, due to an agreement created between the City and the Dallas -Fort Worth International Airport. ■ Two noise contour "zones" were created that run through the city, as indicated on the land use map. ■ No residential development is allowed with the 75+ LDN noise contour ■ Residential development is allowed in the 65-75 LDN noise contour provided that a certain noise level reduction is met. ■ Non-residential uses are permitted in both contour zones but must meet specific noise level reduction requirements. �DLVLL®PMLNT STRATEGISTS City of Southlake 2030 Consolidated Future Land Use Plan Source: City of Southlake Consolidated Future Land Use Plan 25 2.0 Regional & Local Overview 2.6 RESIDENTIAL DEVELOPMENT IN SOUTHLAKE The City of Southlake's residential development landscape is unique to the DFW Metroplex due to high per capita incomes, zoning policies that are positioned towards single-family residential, and high average sales prices. There were 8,494 housing units as of 2010 (US Census), for a density of 388 units per square mile. Population density is at 1,244 residents per square mile as of 2014. This is comparatively lower than the DFW Metroplex and the U.S. urban average, as displayed in Figure 2.11. The home ownership rate in Southlake is currently at 94%, which is significantly higher than the Texas average of 64%. Only 0.8% of housing units are recognized as "multi -unit" (approximately 68 units) in Southlake, compared to 24.1% in Texas. The low density, single family home character of residential development in Southlake continues to foster auto -oriented development patterns, although retail developments such as Southlake Town Square have attempted to mitigate this. Table 2.3 Southlake Population Density Population Density Per Square Mile City of Southlake 1,244 Dallas -Fort Worth- Arlington 2,879 U.S. Urban Area Average 3,245 Source: US Census Bureau 2010, City of Southlake 2014 %� Ar [�_Mqw% P M,0 DEVEL®PMENT STRATEGISTS I■ 4- 10 it 26 10 2.0 Regional & Local Overview Figure 2.9 displays the spatial locations of new residential development in Southlake and the corresponding Table 2.4 goes into greater detail of these projects. Residents of Southlake enjoy access to one of the best school districts in Texas according to the Texas Education Agency. Sophisticated neighbourhoods are equipped with luxurious estate homes, wide boulevards with mature trees and surrounded by lush greenbelts. Due to the size of Southlake, and continued residential expansion over the past several decades, there is now limited greenfield land available for new construction. Table 2.4 New Residential Development © Carillon © Savannah Estates © Chelsea Park O Shady Oaks © Westwyck Hills O Winding Creek ORidgeview South Gateway Lakes OGarden District Highland Oaks Oak Bend ® South Village at Watermere 11 M" 0 DEVELOPMENT STRATEGISTS Size (Lots) Completion D. 404 lots Under Construction, 2016 - 2017 Completion 96 lots Construction Begins Summer 2014 16 lots Under Construction, Completion Fall 2014 149 lots Under Construction 3 lots Completed 2007 74 lots Under Construction 41 lots Under Construction 39 lots Construction Begins Summer 2014 118 lots Development Application Under Review 27 lots Completed 12 lots Under Construction 71 lots Under Construction 28 _ 2.0 Regional & Local Overview 2.7 DFW & SOUTHILAKE TOURISM OVERVIEW The Dallas Fort Worth Metroplex is the No. 1 visitor and leisure destination in Texas, and is centrally located within a four-hour flight from most North American destinations. There are 29.97 million annual domestic visitors to DFW, with the region receiving most of its visitors in the springtime. Daily, the Dallas Fort Worth International Airport welcomes approximately 165,580 passengers, with the total number of passengers in 2013 reaching 60.44 million. This places DFW Airport in the top 10 within the world for passenger numbers according to Airport Council International. AMTRAK also provides daily service to Dallas via Union Station. Examining Southlake's tourism market, the primary draw for the City is Southlake Town Square, with most overnight visitors staying at the Hilton Hotel. Leisure daytime visitors, particularly those who live within a 20 mile radius and arrive by car form the foundation of Southlake's tourism market. Overnight niche markets for the City of Southlake include business travelers, weekend getaways, girlfriend getaways, shopping travelers, education trips and culinary travel. Total Tarrant County visitor spending in 2012 was $4,913,200,000, with an average annual percent increase of 4.5% since 1990. Source: Visit Dallas, DFWAirport.com, Tarrant County P DLVLL®PMLNT STRATEGISTS Table 2.5 Drive Times to DFW Metroplex City Miles Drive Time Austin, TX 195 3 hours Houston, TX 240 4 hours Kansas City, MO 489 8.5 hours Little Rock, AR 320 5 hours Memphis, TN 452 8.5 hours New Orleans, LA 520 8 hours Oklahoma City, OK 207 3.5 hours San Antonio, TX 275 4.5 hours Shreveport, LA 187 3 hours Texarkana, TX 180 3 hours Tulsa, OK 258 4.5 hours Source: Visit Dallas _ 2.0 Regional & Local Overview Figure 2.10 Major Tourism Attractions Near Southlake OSouthlake Town Square © Grapevine Mills © Bass Pro Shops OHistoric Downtown Grapevine © Grapevine Lake OGaylord Texas Resort & Convention Center OGrapevine Vintage Railroad Colleyville Natural Center OThe Village at Colleyville WBob Jones Nature Center 0,apfiiVl�DLVLL®PMLNT STRATEGISTS Source: Dallas Fort Worth & Beyond 30 2.0 Regional & Local Overview Figure 2.11 Hospitality Employer Density Heat Map in the DFW Region Meeting and Exhibition Facilities, and major Civic and Convention Sites, as listed by the Dallas Regional Chamber are listed by number on the heat map. Southlake Hilton was not mentioned by the Chamber. Source: Dallas Regional Chamber iA) IIi1�1111IPl1WITALITY BUSINESSES �l��' �DLdLL®PMLNT STRATEGISTS Meeting and Exhibition Facilities ODallas Convention Center © Fort Worth Convention Center © Music Hall at Fair Park QGaylord Texan Resort and Convention Center © Hilton Anatole Hotel OSheraton Dallas Hotel ODallas Market Hall Hyatt Regency Dallas at Reunion OWill Rogers Memorial Center 0 InterContinental Dallas Other Civic and Convention Sites Arlington Convention Center ® Irving Convention Center at Las Colinas ® Plano Convention Center Addison Convention Center ® Denton Expo Center Frisco Conference Center Richardson Civic Center Hurst Conference Center 31 mm,.-O� DEVELOPMENT STRATEGISTS 32 3.0 Retail Analysis 3.1 DFW RETAIL MARKET OVERVIEW The DFW Metroplex saw continuing retail expansion and improving markets in 2013. It has experienced the highest retail occupancy rates since pre -recession, thanks to modest retail construction in 2013, allowing already -constructed vacant spaces to be leased out. 67% of retail absorbed into the market in Q4 2013 was new build -to -suit construction. The current retail occupancy rate is 90%, with fewer than 70 large vacant retail spaces in DFW in 2013. Leasing activity is strengthening as net absorption climbed above the 1 million square feet mark in Q4, the highest since before the recession. Retail space availability continues to shrink, which is now causing record high occupancy rates and strong demand for new development moving forward over the next few years. Big box space continues to experience very low availability, with approximately 5.7 million sq. ft. left available in the DFW market in Q1 2014. Furthermore, Per Capita Income continues to grow and retail spending is expected to follow. Source: CBRE, Marcus & Millichap Vl�[�_Mqw% P STRATEGISTS 3.0 Retail Analysis With low vacancy rates, significant speculative retail projects are ready to break down in 2014, particularly mixed-use, infill and master -planned communities with strong residential components located in suburban areas. In 2013, developers added 2.6 million sq. ft. of retail space to the DFW stock, surpassing the 2.4 million sq. ft. delivered during 2012. Retail stock was increased 0.6% due to this. Big retail drivers in DFW continue to be grocery stores, taking a bigger part of the consumer buying market. This growth has attracted new grocery chain entrants to the market from both western and eastern States. Alternative tenants including medical uses, entertainment and fitness centers continue to have a large share of the DFW retail space. Big box healthcare centers with lots of departments are entering the region. The majority of retail space added in 2013 is pre -leased, and additional demand for retail space will contribute to vacancy falling 80 base points to 8.6% at the end of 2013. There has been an influx of new construction, 2014 and 2015 are expected to be just as strong as retailers continue to expand due to strong employment and population growth. Source: CBRE, Marcus & Millichap Vl�[�_Mqw% P STRATEGISTS 34 3.0 Retail Analysis Figure 3.1 DFW Retail Market by Classification freestanding Single Tenant 29% Other (Theme/Festival & Outlet) Regional & Super 1% Regional Mall 13% M EMON441, �' DEVELOPMENT STRATEGISTS Lifestyle Center Community Center 2% 15% Neighborhood Center 24% Strip Power Center Center 8% 8% Source: CBRE 3.0 Retail Analysis Figure 3.2 DFW Major Regional Retail Centers ' a Far North Dal.las North - of fi Central IN . I Ovv , i ,+■0. ESt O it ■ r� °■4 :'a e ■ . I ° 9 Southlak.e gar o h ' ': w. � IO[ � 44� s• a 4 1 ■ t � i �. F• q! ° i � ,� x• 4� �{�'.�7 1. • ■T,y4 ■ai ° t ° f4id-Citiesto r ' ■ �i' lientral r �4_-4ii44.R1 >4s.= II ^ ■' 4l+ R®�J4 : I � L •i_ i n VYort i 4� - .. aOaLLA 0-'utlyirng • �� ' &rt .' . 40 ■ F■ 4 I •i.� ■ ■ � ., _ _ ° .. .-.. � _rye. � s 0 Major Retail Centers a+ Source: Dallas Economic Development Guide .safs�ae��caa I;, Dana`. ,POP M�� DLVLL©PMLNT STRATLGISTS The following pages provide a detailed description of the major regional retail centers in the DFW Metroplex, as identified by the Dallas Economic Development Guide. The major regional retail centers are displayed on the map in the form of blue dots. Their corresponding numbers match to the numbering system in the tables. 01 3.0 Retail Analysis Table 3.1 DFW Major Regional Retail Centers 1 NorthPark Center Dallas Enclosed Mall 2 Northeast Mall Hurst Enclosed Mall 3 Stonebriar Center Frisco Enclosed Mall I 4 The Parks at Arlington Arlington Enclosed Mall 5 Grapevine Mills Mall Grapevine Enclosed Mall 6 Galleria Dallas Enclosed Mall 7 Southwest Center Mall Dallas Enclosed Mall I 8 The Shops at Willow Bend Plano Enclosed Mall 9 Ridgmar Mall Fort Worth Enclosed Mall I 10 Town East Mall Mesquite Enclosed Mall 11 Colin Creek Mall Plano Enclosed Mall I 12 Vista Ridge Mall Lewisville Enclosed Mall 13 La Gran Plaza Fort Worth Enclosed Mall I 14 Irving Mall Irving Enclosed Mall Source: Dallas Economic Development Guide, Google Maps Note: Drivetime to Southlake CBD (Town Square) is approximate and was calculated using Google Maps Direct Route Driving Directions with light traffic. �V DLVLL©PMLNT STRATEGISTS Drive Time to Other :D Dillard's, Macy's, Neiman Marcus, AMC Theatre, Forever 21, 2,000,000 Nordstrom H&M 40 Min DiIIard's, Macy's, JC Nordstrom, Dick's Sporting 1,640,000 Penney, Sears Goods, Rave Cinema 25 Min Nordstrom, JCPenney, Dick's 1,600,000 Dillard's, Macy's, Sears Sporting Goods 30Min Nordstrom, JCPenney, Dick's 1,500,000 Dillard's, Macy's, Sears Sporting Goods 35 Min Legoland Discovery Center, AMC Theatre, Bed Bath & Beyond, Off 5th 1,440,000 Burlington Coat Factory Saks Fifth Avenue 15 Min Forever 21, H&M, Old Navy, 1,420,000 Macy's, Nordstrom, Belk Banana Republic 30Min 1,390,000 Sears, Macy's Burlington Coat Factory 45 Min Neiman Marcus, Crate & 1,380,000 Dillard's, Macy's Barrel 30Min JCPenney, Neiman Marcus, 1,270,000 Dillard's, Macy's, Sears Rave Cinema 40 Min 1,250,000 Dillard's, Macy's, Sears JCPenney 45 Min 1,120,000 Macy's, Sears JCPenney, Amazing lake's 35 Min JCPenney, Cinemark 1,100,000 Dillard's, Macy's, Sears Theatre 20 Min Anna's Linens, Burlington 1,100,000 Ross Coat Factory, Citi Trends 35 Min Burlington Coat Factory, 1,053,000 Dillard's, Macy's, Sears AMC Cinema 20 Min 37 3.0 Retail Analysis DFW Major Regional Retail Centers ■ 14 IMP 15 Valley View Center Dallas 16 The Villages at Allen Allen 17 The Villages at Fairview 18 Six Flags Mall/Plaza Center 19 Hulen Mall 20 Firewheel Town Center 21 Arlington Highlands 22 Southlake Town Square 23 Golden Triangle Mall 24 Centre at Preston Ridge 25 Alliance Town Center 26 Uptown Village at Cedar Hill 27 The Shops at Park Lane Source: Dallas Economic Development Guide, Google Maps Allen Arlington Fort Worth Garland Arlington Southlake Denton Frisco Fort Worth Cedar Hill Dallas M Emq%%, DEVELOPMENT STRATEGISTS Drive Time to jmatAEst. Size (SF) J& Anchors Other Primary Tenants Southlake CBDJ Enclosed Mall 1,030,000 Sears JCPenney 30 Min Un -enclosed Cabela's, Dick's Sporting Mall/Lifestyle Center 1,000,000 SuperTarget Goods 40 Min Open -Air JCPenney, Whole Foods, Mall/Lifestyle Center 1,000,000 Dillard's, Macy's iPicTheatres 40 Min Dillard's Clearance Enclosed Mall 975,000 Center CinemarkTheatre 25 Min Enclosed Mall 940,000 Dillard's, Macy's, Sears Forever 21, Hollister 45 Min Open -Air Mall/Town Dick's Sporting Goods, Ethan Center 904,000 Dillard's, Macy's Allen, Pier 1 Imports 40 Min Dave & Busters, Studio The Container Store, Lifestyle Center 900,000 Movie Grill PetSmart 30 Min Apple, Pottery Barn, Williams -Sonoma, Victoria Town Center Barnes & Noble, Harkins Secret, Anthropologie, CBD/Lifestyle Center 840,000 Theatre Banana Republic JCPenney, Ross, Barnes & Enclosed Mall 766,000 Dillard's, Macy's, Sears Noble, DSW 35 Min Power Center 730,000 SuperTarget Ross, DSW, Applebee's 30 Min Power Center 700,000 JCPenney, Belk Best Buy, Sam Moon 25 Min Open -Air Barnes & Noble, Dick's Mall/Lifestyle Center 615,000 Dillard's Sporting Goods 40 Min Open -Air Mall/Urban Dick's Sporting Goods, Whole Foods, Off 5th Saks Shopping 600,000 Nordstrom Rack Fifth Avenue, Home Goods 35 Min 3.0 Retail Analysis Although outdoor lifestyle and semi -enclosed malls are have become more popular over the past decade, the majority of major regional retail centers in the DFW Metroplex are still enclosed retail malls. The closest regional retail centers to Southlake are Grapevine Mills, Alliance Town Center, Irving Mall and Vista Ridge Mall. Grapevine Mills is a destination shopping/entertainment center. It is positioned as mid -market, with factory outlet shopping and entertainment uses. Alliance Town Center, Irving Mall and Vista Ridge Mall are also positioned mid- market, and have very similar tenant offerings such as Macy's, Dillard's, Sears, JCPenney and a movie theatre. Higher -priced market offerings and shopping environments that could rival the architectural style and pleasing shopping environment in Southlake are typically located a 30 minute drive or further. Access to larger populations in many of these communities allows competing regional retail centers to have tenants that have not yet located in Southlake, such as luxury retailers and department stores. �iVl�[�_Mqw% �DEVEL®PMENT STRATEGISTS c3'7 3.0 Retail Analysis Northeast Mall in Hurst, at the major highway interchange of 121 and 820, is the largest and most important regional retail center in relative close proximity to Town Square and the local Southlake trade area. Northeast Mall is the second largest mall in the Metroplex and has a strong tenant mix including major anchors such as Nordstrom and Macy's. It has a trade area that spans across the western portion of the Metroplex. The Shops at Highland Village, in the City of Highland Village provide a similar shopping setting to that of Town Square, on the other side of Lake Grapevine. Although not as extensive of a mix as in Southlake, the Shops at Highland Village and its surrounding retail cluster is a strong competitor north of the lake to communities such as Flower Mound and Lewisville. Similar in name, but located in Dallas, Highland Park Village, north of downtown Dallas, is only 200,000 square feet in size but carries a large selection of high-end luxury retailers that Southlake strives for. Retailers in Highland Park Village include Chanel, Escada, Jimmy Choo, Tom Ford, Zegna, St. John, among others. Highland Park Village commands some of the highest rents in the Metroplex at $125 per square foot on average. With Tom Thumb and Williams Sonoma closing in the center, it is expected that more higher -end large scale retailers will be looking to lease place in the Village. Vl� ' P STRATEGISTS 3.0 Retail Analysis NorthPark Center, also located in Dallas and near Highland Park Village, is one of the top tourist destinations in the DFW Metroplex. 30% of visitors to the center travel from 50 miles away or more. It is the largest retail destination in the Metroplex and has the following top performing stores: ■ #1 Neiman Marcus in the United States ■ #1 Nordstrom in North Texas ■ #1 Macy's in North Texas ■ #1 Dillard's in North Texas ■ #1 AMC Theatre in North Texas NorthPark retailers generally produce sales 30-60% higher than the same retailers in other shopping centers due to the high amount of visitors. The center has gone so far as to implement on-site tax-free shopping for international visitors. 45% of NorthPark shoppers have household incomes over $150,000. 68% of visitors are from a 50 -mile trade area, and the surrounding primary trade area has higher densities than Southlake and wealthy demographics. Together with Highland Park Village which is less than 4 miles away from NorthPark, the two shopping centers have created a luxury cluster that is unrivaled in the Metroplex. High-end luxury boutiques entering the market choose between the open-air village atmosphere of Highland Park Village, or the enclosed super -regional nature of NorthPark. �iVl� ' �DEVEL®PMENT STRATEGISTS 3.0 Retail Analysis Retail in Communities Surrounding Southlake ti Northwest Plaza, Grapevine Downtown Grapevine, Grapevine 414W Dove Corner, Grapevine Vl�[�—Mqw% P STRATEGISTS Grapevine Mills, Grapevine Colleyville Plaza, Colleyville Village at Colleyville, Colleyville Market Street, Colleyville Wautaga Pavilion, Wautaga anops at i ropny aua, i ropny auo 3.0 Retail Analysis Retail in communities surrounding Southlake such as Grapevine, Colleyville, Trophy Club, Keller, and Wautaga are oriented towards neighborhood commercial, strip retail, big box, and power center formats. Much of the commercial space has lower architectural standards than Southlake, but also lower lease rates. The major recent development in Colleyville has been the re- positioning of Colleyville Downs. Whole Foods will soon be opening at Colleyville Downs which will provide upmarket grocery shopping for Colleyville residents. The Village at Colleyville is a 24 acre mixed-use development with a total build -out of 800,000 square feet of upscale retailers, restaurants, entertainment, hotels, offices and residential. Retail at Village at Colleyville focuses on independent local retailers, compared to national retailers at Town Square. The retail cluster along the Denton Hwy (377) intercepts the growing residential population to the west. It provides daily convenience shopping needs such as grocery, pharmacy and services for local residents in the surrounding communities. Currently, cross shopping from surrounding communities into Southlake occurs for more regional draws such as Town Square, Costco, Lowes and Home Depot. �iVl�[�_Mqw% �DLVLL®PMLNT STRATEGISTS �QIIClrnilla� PERREN GASC 972.888-8000 3.0 Retail Analysis 3.2 COMPETITIVE RETAIL DEVELOPMENTS ENTRADA GENERAL OVERVIEW ■ Location: Westlake ■ Size: 320 Room Hotel 1.5 million SF Residential 550,000 SF Office 550,000 SF Retail ■ Developer: Blackard Global FEATURES ■ Mixed-use, pedestrian -friendly 85 -acre development Entrada with construction beginning as early as 2014. ■ Westlake Town Council has approved the zoning and preliminary plan for the project. ■ $500 million Spanish -inspired mixed-use development will become a unique destination north of the DWF Metroplex. ■ Village concept will comprise all a resident would need for daily life — commercial, retail, residential and unique features such as a famers' market. 0 10 —15 year expected build out. �iVl� ' �DEVEL®PMENT STRATEGISTS 3.0 Retail Analysis OF- COLLEYVILLE DOWNS GENERAL OVERVIEW ■ Location: Colleyville ■ Size: 190,664 SF 40,000 SF Whole Foods 35,000 SF PetCo ■ Developer: Centennial Real Estate Co. ■ Anchor Tenants: Whole Foods, PetCo ■ Colleyville Population: 23,936 FEATURES ■ The former Albertsons in Colleyville is being replaced by a Whole Foods and PetCo, serving as the anchors to a new shopping center formally known as Village Park, renamed as Colleyville Downs Shopping Center. 54 'A. y IrAr [�-Mqw% L)EVELOPMLNT STRATEGISTS ■ The City of Colleyville is supporting the project with a $2.25 million grant from its Tax Increment Reinvestment Zone. ■ The developer acquired the shopping center from three separate owners and plans to extensively renovate the building for the new Whole Foods and modernize other retail areas through unique architectural features. ■ Whole Foods is making it possible for the developer to hand pick premier retailers and restaurants that want to be near the Whole Foods in Colleyville. ■ Zoe's Kitchen, Matt's Rancho Martinez restaurant and Einsten Bros. Bagels have signed a lease in the area so far. ■ Construction is underway, with Whole Foods on schedule to be opened in 2014. K i 3.0 Retail Analysis ALLIANCE TOWN CENTER GENERAL OVERVIEW ■ Location: 135W and Heritage Trace Parkway, Fort Worth ■ Size: 850,000 SF of existing retail, Phase 2 will add 87,500 SF and Main Street lifestyle expansion will add 175,000 SF ■ Anchor Tenants (existing): JC Penny, Belk ■ Developer: Hillwood and Trademark Property Company ■ Population: 75,000 + within 3 miles NOAlliance TOWm CENTER. cummemkmized use THRs CunmerdaUMedlkal MuB FFa€rtity FEATURES ■ Center of activity for the growing North Fort Worth area, Ccq)orateC offering a critical mass of business, residential, shopping, dining and entertainment. RetaWffte ■ Alliance Town Center will be a fully -integrated mixed-use community upon completion. ReWOTWRetall ■ Recognized by the U.S. Green Building Council for LEED Neighborhood Development certification, only one of two such projects in the State of Texas. ■ Phase 1 of the 350 -acre power center and mixed-use development opened in Fall 2008. ■ Groundbreaking on Phase 2, adding 87,500 SF of retail is underway and completion is expected in summer 2014. Medl01Ofte ■ Main Street lifestyle expansion is pre -leasing and Mt3IPO gee scheduled to open in early 2015 featuring 175,000 SF of specialty retail and restaurants. Mu"I"„'te PiVl� ' DEVELOPMENT STRATEGISTS 'aMMZRK3E3__mom �W' a.�rrrrm ay wwd.P. ata .e,. .p ay.. Icw i[Q li• ,r.. 'aMMZRK3E3__mom �W' .p ay.. Icw i[Q li• ,r.. Yr iY YYY 46 .p ay.. Icw i[Q li• ,r.. 46 3.0 Retail Analysis CIRCLE T RANCH GENERAL OVERVIEW ■ Location: US 377 and SH 170, Westlake ■ Lot Size: 2,500 acres mixed-use master planned community ■ Retail Lot Size: 3.8 acres existing and 17 acres planned ■ Developer: Hillwood Properties ■ Population: 30,000+ with 25% growth in the last two years FEATURES ■ Alliance Texas is a 17,000 -acres master -planned community that includes three distinct developments: Alliance, Circle T Ranch, and Heritage. ■ Together they will offer world-class aviation, office, industrial, retail, educational, residential and recreation opportunities. ■ Westlake Corporate Center — 800 acres dedicated to corporate campuses and office sites. ■ Westlake Corners — retail and support services located at SH 170 and US Highway 377. ■ Located ten minutes to both DFW Airport and Fort Worth Alliance Airport. Vl�[�_Mqw% P STRATEGISTS 47 3.0 Retail Analysis 3.3 SOUTHLAKE RETAIL MARKET OVERVIEW The City of Southlake is categorized as part of the "Mid - Cities". The Mid -Cities experienced the highest Total Net Absorption in the DFW Metroplex in 2013 according to commercial brokerage firm CBRE. Vacancy rates in the Mid -Cities is below the Metroplex average and Average Lease Rates are slightly above the average, demonstrating a strong retail sector in the area. Southlake's robust economy generated an 11.9% increase in sales tax revenue from fiscal year 2012 to fiscal year 2013. The Fresh Market, an upscale grocery store, will open in 2014 in the Park Village shopping center which is being built kitty- corner to Town Square. Trader Joe's is set to open in Southlake Town Square in November 2014 and is currently well under construction. On the following pages, Figure 3.3 and Table 3.3 display Southlake's current organized major retail offerings. Table 3.2 Mid -Cities in DFW Market Overview Mid -Cities Total DFW 49,659,886 273,763,040 3,499,801 22,278,381 �iVI�V DEVELOPMENT STRATEGISTS 7.0% 8.1% $13.87 $13.82 664,421 3,028,282 Source: CBRE 48 MINOR �u11»un�mq r �� w� \ _ ■ru ��lll.'J� 11 i � t r.�G��riii ti �A 12 i • •q. m.: ■�i� i 15 6 '�.■�� .Rfi �M nmy-{,� �, „� �a � Amur i �� ►��./ � n1ir�-� 4. �•� �r All 16 11 9 r 17�1� • �•�.: 17 3.0 Retail Analysis Table 3.3 Southlake Major Organized Retail Source: MXD Development Strategists �V DEVELOPMENT STRATEGISTS Southlake Town Williams -Sonoma, Victoria Town Center CBD / Lifestyle 1 Square E Southlake Blvd Center 2 Southlake Village E Southlake Blvd Neighbourhood Center i 3 Gateway Plaza E Southlake Blvd Power Center 4 Wyndham Plaza E Southlake Blvd Neighbourhood Center Navy, TJ Maxx, Michael's Southlake Weir's Furniture Village, Baja's Bar & Grill, Gingerine, 5 Marketplace W Southlake Blvd Neighbourhood Center 6 Suntree Square W Southlake Blvd Neighbourhood Center 7 Shafer Plaza E Southlake Blvd Neighbourhood Center 99,269 Southlake Massage Heights 51,283 8 Corners E Southlake Blvd Neighbourhood Center Mattress Firm, Home Goods, Shops of Staples, Toys R Us Supercuts 9 Southlake E Southlake Blvd Lifestyle Center 10 Jellico Square W Southlake Blvd Neighbourhood Center Chase Bank, The Little Gym, Southlake Park Sprouts Farmers Market Massage Envy 11 Village E Southlake Blvd Lifestyle Center 12 The Home Depot E Southlake Blvd Big Box Center 13 Lowes E Southlake Blvd Big Box Center 14 Costco E Southlake Blvd Big Box Center 15 Southlake Oaks W Southlake Blvd Strip Retail Torchy's Tacos, RunOn! Village at 16 Timarron E Southlake Blvd Neighbourhood Center 17 Kimball Crossing E Southlake Blvd Strip Retail Source: MXD Development Strategists �V DEVELOPMENT STRATEGISTS 2% 3% 12% Under Construction nil nil nil nil 17% nil 50 Apple, Pottery Barn, Williams -Sonoma, Victoria Barnes & Noble, Harkins Secret, Anthropologie, 840,000 Theatre Banana Republic RadioShack, Panera Bread, 117,553 Kroger Grocery Movie Trading Co. Bed Bath & Beyond, Old 364,813 Khol's Navy, TJ Maxx, Michael's Weir's Furniture Village, Baja's Bar & Grill, Gingerine, 67,895 Wildwood Grill Artemis Boston Market, Hobby 132,255 Walmart Lobby, Hallmark Pizza Hut, Starbucks, 99,269 Tom Thumb Massage Heights 51,283 Shoe Pavilion Smoothie King, Nail Salon Mattress Firm, Home Goods, 134,894 Staples, Toys R Us Supercuts Nordstrom Rack, Peir 1, 210,865 Central Market DSW Shoes Chase Bank, The Little Gym, 41,914 Sprouts Farmers Market Massage Envy 190,000 REI, The Fresh Market Gloria's, Ra Sushi 212,286 The Home Depot PetSmart 130,000 Lowes 145,000 Costco 20,610 Fuzzy's Taco Shop Sushi Sam, Coldwell Banker 36,284 Frost Bank Studio A, Adventure Kids 19,000 Zoes Kitchen Torchy's Tacos, RunOn! 2% 3% 12% Under Construction nil nil nil nil 17% nil 50 3.0 Retail Analysis PiVl� 'DEVEL®PMENT STRATEGISTS Southlake has approximately 2.8 million square feet of organized retail space in the city, using retail centers of 15,000 square feet or greater. This includes Park Village that is currently under construction. Spatially, Southlake's retail is clustered along Southlake Boulevard, primarily between Carroll Avenue and the 1709/114 interchange that divides Southlake and Grapevine. There are smaller retail clusters at White Chapel Boulevard and Davis Boulevard. The retail in the city has a high architectural standard and almost all developments use material such as brick, stone, true stucco, and other upscale features. Southlake Town Square acts as the core of the city's retail, dining, and entertainment uses. It is a super -regional shopping destination that pulls in consumers from around the DFW Metroplex, and as far as Oklahoma. It is currently Southlake's only true pedestrian friendly mixed-use development, with office, residential, and civic uses all in one place. Town Square is an expensive environment to build and maintain, and many retailers cannot afford to locate in the center, especially local start-ups. Rates can be $10 to $15 per square foot higher than other retail centers. This indicates that sales have to be high enough to justify the higher lease rates. If retailers do not have the sales per square foot high enough to feasibilty locate in Town Square from a financial perspective, they either locate in adjacent shopping centers or do not enter the Southlake market altogether. �iVl�[�_Mqw% 3.0 Retail Analysis �DEVEL®PMENT STRATEGISTS The Shops of Southlake provides a shopping experience that complements Town Square across the street, with a park and fountain fronting Southlake Boulevard. The design of Shops of Southlake can be viewed as a quasi -lifestyle center, although it does not have the same pedestrian friendly nature and urban grid that has been constructed at Town Square. The remaining retail offering in Southlake, although built at a higher architectural standard than neighboring cities, are neighborhood centers, power centers, big box, and strip retail that are typical of suburban commercial. These auto -oriented centers provide daily convenience shopping for local residents through grocery, pharmacy, services and dining. Retail centers along the periphery of the City such as Gateway Plaza and Southlake Marketplace are having a difficult time competing with newer central developments that are clustered along Southlake Boulevard between Carroll Avenue and Kimball Avenue. It is noted that Southlake has a lack of a local, independent retail base, as most stores and restaurants are regional or national chains. The higher than average lease rates in developments such as Town Square or Shops of Southlake play a factor in this current trend. 52 3.0 Retail Analysis The Southlake retail market is performing very well when viewing current metrics. The approximate retail vacancy rate as of April 2014 is 6%, with 133,000 square feet of vacant space, as calculated by MXD. Factoring out big box stores, the approximate vacancy rate is 7%. These vacancy rates include Park Village which has approximately 76,000 square feet of space for lease as of April 2014, and 44,000 square feet of space at Gateway Plaza. These vacancies are in-line with the Mid -Cities (7%), and below the DFW Metroplex rate (8.1%) according to CBRE. It is typical to construct new retail when vacancy rates are below 10% as it displays demand for new product, however this is not the only metric to consider for retail expansion, as is shown later in the study. Figure 3.4 displays the growing Southlake retail market with major under construction and planned retail developments along with their spatial location. Figure 3.5 meanwhile exhibits these developments in terms of their square footage, with 320,000 square feet of retail currently under construction. There is approximately another 720,000 square feet planned for the future although this may chance as development applications shift to meet demands of the market and council approval. �iVl�[�_Mqw% �DEVEL®PMENT STRATEGISTS Wi `0% irk - 53 Em 3.0 Retail Analysis Figure 3.5 Southlake Major Retail Planned/Under Development Chart 0 200,000 400,000 600,000 800,000 Square Footage 'Ed iVl�� DEVELOPMENT STRATEGISTS 1,000,000 Vl�[�_Mqw% 3.0 Retail Analysis P STRATEGISTS mr- KIMBALL PARK ■ 15.5 acre development located at N Kimball Ave and Hwy 114 W frontage road. ■ Anchored by a four-story, 175 room Cambria Suites hotel. ■ The hotel will also include a restaurant and meeting/conference space. ■ Other uses will include a three-story, 96,000 square foot office building, restaurants, a coffee shop and small-scale retail uses. ■ Project to break ground in Fall 2014 and the hotel is expected to open in late 2015. 3.0 Retail Analysis KIMBALL OAKS ■ 26 acre commercial development located at the south- west corner of Kimball Avenue and Southlake Boulevard. ■ 150,300 square feet at total build -out including the already built 19,000 Phase 1 development of Kimball Crossing fronting Southlake Boulevard. ■ Approximately 130,000 square feet of space to still be developed. ■ Will include several pad restaurant sites and several junior anchors ranging from 20,000 to 25,000 square feet. ■ It is now in early phases of pre -construction as of May, 2014. M EMON441, �' DEVELOPMENT STRATEGISTS Figure 3.7 Kimball Oaks Site Plan THLAIIE ,:--- 57 3.0 Retail Analysis PARK VILLAGE ■ Located southwest of Southlake Town Square, on the southwest quadrant of Carroll Avenue and Southlake Boulevard. ■ 190,000 square foot development over 22 acres. ■ Will be anchored by REI and The Fresh Market. ■ Other retailers will include Gloria's and Ra Sushi. ■ Expected to have dining and entertainment options that will cater to the nightlife crowd. ■ Upscale development will be pedestrian friendly which will complement the nature of the surrounding retail. ■ Over 50% leased as of May 2014. 'Papa M, DEVELOPMENT STRATLGISTS 58 3.0 Retail Analysis CARILLON ■ 285 -acre master planned community located on the north-east quadrant of White Chapel Boulevard and SH 114 Service Road. ■ Influenced by French Architectural design. ■ Commercial portion of approximately 53 acres is called "Plaza at Carillon". ■ Anchored by newly constructed $21 million Children's Medical Center which opened in 2011. ■ 350,000 to 500,000 square feet of retail planned over 41 acres. ■ 300,000 square feet of office planned over 12 acres. Additional 50,000 square feet of office over retail. ■ Entitlement for 200 unit hotel in place. ■ Other uses include a performing arts center, entertainment, and services. M EMON441, �' DEVELOPMENT STRATEGISTS 3.0 Retail Analysis Figure 3.8 Carillon Site Plan 'Papa M, DEVELOPMENT STRATEGISTS PHASE 1A P7P°,e�, �----__--------�—_ --- -_ y , � L N v 4 �xPHASf 4A t PHASE I I P y _ 4 #` � PI, ASE 31� 1 I- �� we, 71T � PHASE 2A-2 ASE �A ... � � Pik yti - ; 2 I ' PHASE SA yC� _ t r PH 11r i i5C I" �I YI LA + ` or Source: Hines 60 3.0 Retail Analysis BRITTON PROPERTY ■ Located at the south-east quadrant of Dove Road and Hwy 114 W frontage road. ■ Located directly north-west of the competing Carillon project. ■ Commercial and Office Zoning currently in place on the tract (CS, 01, 02, C1, C2, C3, 131 and HC). ■ Cencor attempting to rezone to permit a retail/residential mixed-use development. Vl�[�_Mqw% P STRATEGISTS Figure 3.9 Britton Property Site Plans �Q 61 3.0 Retail Analysis 3.4 SOUTHLAKE RETAIL ANALYSIS & DEMAND Following the Retail Market Overview, MXD delved deeper into the analysis and demand side of the retail equation in Southlake to understand whether the City is, or already has reached a retail market saturation point. A SWOT (strength, weaknesses, opportunities, and threats) analysis is followed by Citizen and Stakeholder surveys, a drive time analysis, trade area delineation, and finally the demand analysis itself, looking at both the present day and a decade into the future. �iVl�[�-Mqw% �DLVLL®PMLNT STRATEGISTS 62 3.0 Retail Analysis Figure 3.10 Southlake Retail SWOT Analysis • S. H. 114 and F. M. 1709 (Southlake Blvd) are regional transportation corridors. Currently not a large amount of direct competition in surrounding communities. High quality architectural style. • Southlake Town Square is a unique shopping destination. • High per capita incomes in the City. Expanding residential development in communities west of Southlake. Retail is primarily clustered along Southlake Boulevard, creating a critical mass of local and regional shopping. • Strong retail product mix. Opening of Trader Joe's and Fresh Market, coupled with Central Market provides strong grocery offerings. • Low vacancies in most retail centers. • Ongoing focus towards an immersive, pedestrian -friendly shopping, dining and entertainment experience in Southlake to differentiate from surrounding communities. ® Attracting more higher -end retailers to match the per capita incomes and spending in Southlake. • Attract various retailers that have not yet established themselves in Texas, but are expanding into the State. Creating a unique destination retail experience to complement Town Square and build upon its regional draw. • Can build upon opportunities presented by having close proximity to DFW Airport. • Revitalization and redevelopment opportunities for certain sites. P,gpm,,O�� 1%� �or EMON441, STRATEGISTS • Southlake is an expensive city to build and maintain retail developments. High quality architectural style = higher lease rates. • Lack of local retailer base. ■ Retail is clustered but still fragmented along Southlake Boulevard, very auto -dependent outside of Town Square. ■ Luxury retailers and department stores are hesitant to locate in Southlake according to brokers and previous studies. • Lack of flagship retail stores. • S.H. 114 Service Roads are "quick -shot" roads, retail struggles, especially on the eastbound side. • Lack of workforce housing within the City creates a low retail labor pool to draw from. • Peripheral location in the DFW Metroplex. • Southlake is almost built -out and population growth is slow. • Over -retailing in the City will lead to cannibalization of retailers and pit retail developments against each other. ■ Other cities in the DFW Metroplex continue to strengthen their well- established high-end retail offerings. • Westlake is beginning to develop large scale retail that will rival Southlake's offering and could capture the growing population to the west. • Colleyville continues to increase the amount and quality of their retail offerings. 3.0 Retail Analysis M�� DEVEL©PMLNT STRATLGISTS In 2013, the City of Southlake conducted a Citizen Satisfaction Survey. In Section 8, the City asked the question "What types of retail and commercial development would you like to see in Southlake?". The following is a word cloud that visually elaborates on the most popular responses. Figure 3.11 Southlake 2013 Citizen Survey sport/fitness hotels high-end restaurants unique/upscale business concert area non -chain restaurants use existing space at Town Square first Nordstrom Macy's Whole Foods upscale retail non -chain stores affordable retailldining tax -generating businesses aidlard's small businesses happy Wl*'th whwe have commercial/corporateloffice complexes sporting goodsiattire store boutiques department stores Trader Joe's malls/outlets more local unique restaurants arts center/theater affordable food quality restaurants large conference/meeting rooms 64 3.0 Retail Analysis M�� DEVEL©PMLNT STRATLGISTS In April & May 2014, MXD conducted stakeholder interviews that included commercial developers, management companies and brokers. These stakeholders were identified by the City of Southlake. MXD asked the question "how do you view the current and future state of retail in Southlake?". The following is a word cloud that visually elaborates on the most popular responses. Figure 3.12 Stakeholder Survey sport/fitness need workforce housing stop construction of cheap low density office performing arts center 114 frontage is not a strong retail corridor multi -family to support retail more restaurants expensive environment to build strong demographics need flexibilitY with p lans upscale retail casts to maintain are high strong retail mix carillon doesn't work for retail over retailed envi*ronmeint tenant cannca`izatson tenant expansion slowing youth are moving away grooming competition outside Southlake quality vs. quantity proper incentive structure need flagship stores Town Square Is CBD density too low for growth destination retail high architectural standards more entertainment 65 _ 3.0 Retail Analysis DEVELOPMENT STRATEGISTS Prior to delineating a Trade Area for the Retail Demand Analysis, MXD conducted a Drive Time Analysis that forms a basis for the primary and secondary trade areas. This drive time analysis looks at 5, 10 and 15 minutes. Southlake Town Square was used as the central point as it is seen as the heart of Southlake and its commercial hub. Figure 3.13 Drive Time Analysis Source: MapPoint, 2013 WA 5 MIN . 10 MIN ® 15 MIN 66 3.0 Retail Analysis �DEVEL®PMENT STRATEGISTS Primary and Secondary Trade Areas were formed using the drive time analysis, demographics, competing retail projects, transportation infrastructure, and physically limiting features (such as Grapevine Lake). It is important to note that the PTA is not just Southlake itself, but includes parts of Grapevine, Colleyvile, Keller, Trophy Club and other municipalities. Figure 3.14 Trade Area Delineation — Primary and Secondary Trade Areas uooper �re dross Koacis Prosper . Ston" k __�=� 377 - Nava ° !.amdal %ent Lincoln n Y Park Rockhill I- 4Ponder Mina Carter Oak Point C Ifin EIdatlado Pk3e uett '_ eJagoe °r LittlFB �Hackberry Frisco ¢Drop) Hicko --J Lakewood pillageTnll � Argyle _Yeeka Lake Dallas ¢Lebono 1,1 Secondary 4Bwn Hill The Trade Area N stin4- �. No lake Cany r 4Hi hland Village Colo - aville I a f — Bartonville' L r T E` Ji SYton - Hebron : rr 1171 ewlllle ¢f = 114"r S� e Mou tr} 2478, - Trophy Ban 6 Club ° :24991 f ........ ... 121. „_..... " �,.... Primary Hall�t�a'La r I�Avandals ¢ f` e ...ke .'"� ,,,,,,ar' Trade Area Richardson oKeller P °...m mNcuine Carrolltol� �� 114 Southlake k "f - _ 'yi armer Buckin Brpn�h 287: 26 – i --Branch Q o olleyuille �: '`',Elm ranch Trinity 377 yo ` Bransford , SaginaVhr o %-, A Watauga o r`161 + 5 �JLo 44 2 2r Blu ' okd Horth Richland Hi Is _ - - _ � %nruersiky Park Hurst u ess ,5 rVing - 4 Halto City ° II bland Park ti Sansom Park o 199 1211 k , Ln ��-.: •, Source: MapPoint, 2013 3.0 Retail Analysis M EMON441, �1 DEVELOPMENT STRATEGISTS Figure 3.15 2014 Household Expenditure Indexed to USA Average 250 0 0 a ba to 200 ■ Primary Trade Area ■ Secondary Trade Area a 150 a i 3 a+ C C 100 X W M O t 50 3 O 2 i G1 a -a - d Qe`\�pyaco � 'eP a�O �a tea°� �eeter ��a�y �y\� \�py Q� 01b,°\IK 11 11 41 13" S`�N16C\)Q'°0- ,�°°°°a°�"a° a�-J ° ta°a 00- \�4 �a fieC°� o � 40" 0- o R} cP`0 Qe Oen �`e`��°�\` x,00 D��a `'°e��a� �j �\\het,\ ea�etJ` \ �z oto �Jt e t° °a �e °cc e 10 �`°cc\°�O cetSource: Claritas �e Indexed against the US Average, the PTA (Primary Trade Area) and STA (Secondary Trade Area) both have higher household expenditures in all 21 retail categories. The highest ratios include jewelry, sporting goods & outdoor recreation, full service restaurants and family entertainment. 68 3.0 Retail Analysis Figure 3.16 Primary Trade Area Household Expenditure 2015, 2025 & 2035 $14,000 L $12,000 $10,000 CL X W 3 $8,000 C C Q -0 $6,000 0 s v $4,000 0 x L a°1 $2,000 $0 MV DEVLLC)PMENT STRATEGISTS 111111111111 111 111 X11 111 oil 111 ... 111 ay cJ c,° ey ey tea rae c,\e ��°t ��°� ��°� ��°t eat y°&\\ate° ee tcea ea��o °�)< e``a� & e 'Z a� yy'0 Qra � o ache�� e°ey e° °\ °" P°or Qety Oe�at �\ , �e 5 0�\�5 oozy °�ao /\Oe�\a�e fat ce `e `"A �\r e`�t ore \yo oto Fit e \ �Q� oar' �: 5�ot ta�� atL` �e �e ■ 2015 ■ 2020 ■ 2025 Source: Claritas The PTA household annual expenditures for 21 retail categories display that the majority of spending occurs on grocery, clothing, general merchandise, pharmacy, personal services, and dining out. The categories with the highest growth rates include personal services, sporting goods & outdoor recreation, and limited service restaurants. M. 3.0 Retail Analysis Figure 3.17 Secondary Trade Area Household Expenditure 2015, 2025 & 2035 $14,000 L $12,000 3 ++ a N $10,000 Q X W m $8,000 C C Q 'o $6,000 0 s v 3 $4,000 0 MV DEVELOPMENT STRATEGISTS 2 a0 $2,000 ■i1 111 ■■■ ■■l $o CA c° e5 e5 e`' e`' e5 �J ey e5 A, 11 o 5 A o a v v t t t t J v .� a �° .e �� o .� a �` �° ,to ,�o ,to ea yot ao e� e a't ,Q`o �.a G�� tam tao y�° �� F t o t h �, etc e o e o 5 \a��J Qra ° `e,1 e�� e�tJ � ece' \ fat � t �� y5Q o�ye a ey�a o'F e v \ o to �c �� P �` 5 � , Q � L hie `oco etyo batt o �e lea �q} .\` 4> e��4r �aoot A'O a�eo ate `e ,\`e �4y 49 P Q Oe ,� o� oo eO et et e� 0 �t°Gets Jt�`r e \e`tt �qt°tee °aO a\ye` 4� 5 tt�e oto e c 'Zo � 5et ta�� atc �e ■ 2015 ■ 2020 ■ 2025 Source: Claritas Although the STA has different demographics than the PTA (including lower household incomes), the STA has almost identical annual expenditure growth when compared to the PTA. These charts display that spending habits in Southlake and communities in the STA are very similar in terms of not only how much is spent, but on which retail categories. HE 3.0 Retail Analysis �iVI�V DEVELOPMENT STRATEGISTS To begin to form an understanding of whether the City of Southlake has or is near a retail saturation point, MXD calculated how many square feet of retail per capita the City has in comparison to other benchmarks. Southlake's retail per capita was calculated using major organized retail center of 15,000 square feet or larger. The City of Southlake has more than four times the U.S. average of organized retail per capita on a square foot basis. Urban areas typically have forty to sixty square feet of retail per capita as they draw from more rural areas. Figure 3.18 Organized Retail Per Capita 120 103 0 100 Ln ■ ro Q 80 c� U v LIEN We, M 4-+ W 40 N 27 24 � 20■ 15 O Southlake Texas United States Canada Source: ICSC 71 3.0 Retail Analysis M�� DEVEL©PMLNT STRATLGISTS MXD tracked and calculated that the retail inventory for the PTA, excluding Southlake, is 3,687,185 square feet of organized retail space. This means that the PTA, excluding Southlake, has an organized retail per capita of 41 square feet, which is more in line with the Texas and US average, and less than half of Southlake's 103 square feet. This demonstrates that Southlake relies quite heavily on spending dollars from shoppers outside of the City boundaries to keep their current retail viable and sustainable. Figure 3.19 Organized Retail Per Capita — PTA Excluding Southlake 120 103 LL. 100 .Ln M +r �CL 80 M u W °- 60 .M 4-0 au °C 40 N to 20 L O Southlake Source: ICSC 41 27 24 PTA Excluding Texas United States Southlake M 3.0 Retail Analysis Table 3.4 Trade Area Household Forecast 'Papa M, DEVELOPMENT STRATEGISTS ■�� • d � t� g� � � � .� did,, � PTA STA 40,829 41,446 42,071 42,707 122,930 125,536 128,197 130,915 43,351 44,006 133,691 136,525 44,671 139,419 45,345 142,375 46,030 145,393 46,725 148,476 47,430 151,623 PTA 48,147 48,874 49,612 50,361 51,121 51,893 52,677 53,472 54,280 55,099 55,931 1.51% STA 154,838 158,120 161,472 164,896 168,391 171,961 175,607 179,330 183,132 187,014 190,979 2.12% Figure 3.21 displays MXD's retail model for calculating the current supportable square footage (retail demand) in the PTA. Using the number of households in both the PTA and STA, as shown in Figure 3.20, along with the per household expenditures for the 21 retail categories, MXD calculated the total aggregate expenditure for both the PTA and STA. Using "Total Expenditure Totals", and applying a Sales Capture Rate that is based off of typical industry standards for a retail market that is fine-tuned for the specific PTA, the Estimated Total Sales were calculated. Multiplying the Total Sales by typical industry Sales Productivity numbers for the DFW region (sales per square foot) the amount of Supportable Square Footage in the PTA was calculated. ■ The amount of Supportable Retail Inventory in the PTA based on spending (retail demand) in 2014 is 5,994,775 square feet. ■ The amount of Retail Inventory in the PTA (retail supply) in 2014 is 6,497,106 square feet. ■ Applying the Mid -Cities 7% retail vacancy rate, the amount of Occupied Retail Inventory in the PTA (retail supply) in 2014 is approximately 6,042,309 square feet. 3.0 Retail Analysis Table 3.5 Trade Area Retail Demand - 2015 MV DEVEL©PMENT STRATEGISTS Retail Category Total Expenditure.... Potential ($ Mill.) ......... .. .Estimated LWSTA % of Misc. Sales Sales as Misc. Inflow Inflow Sales Total Sales Supportable Sales Per SF Supportable SF Grocery & Specialty Foods $400.9 $1,218.1 80% 5% $320.71 $60.9 1% $3.9 $385.5 $500 770,945 Pharmacy $152.3 $462.9 80% 5% $121.9 $23.1 1% $1.5 $146.5 $650 225,353 Alcohol &Tobacco $96.3 $293.7 80% 5% $77.0 $14.7 1% $0.9 $92.6 $700 132,345 Personal Services $140.5 $394.2 80% 5% $112.4 $19.7 1% $1.3 $133.4 $325 410,512 Department Stores $118.2 $352.9 60% 15% $70.9 $52.9 5% $6.5 $130.4 $350 372,582 Clothi ng Stores $293.4 $869.6 70% 15% $205.4 $130.4 5% $17.7 $353.5 $400 883,726 Shoe Stores $34.5 $104.8 70% 15% $24.2 $15.7 5% $2.1 $42.0 $450 93,273 Jewelry Stores $33.9 $94.8 70% 15% $23.7 $14.2 5% $2.0 $39.9 $550 72,575 Health & Beauty $68.2 $205.6 70% 15% $47.7 $30.8 5% $4.1 $82.7 $375 220,566 Home Furnishings &Accessories $105.6 $310.4 60% 10% $63.4 $31.0 5% $5.0 $99.4 $300 331,319 Home Electronics &Appliances $59.3 $178.6 60% 15% $35.6 $26.8 5% $3.3 $65.6 $475 138,170 Home Improvement&Gardening $91.5 $288.9 70% 15% $64.0 $43.3 5% $5.7 $113.0 $375 301,423 Books & Multimedia $23.4 $68.7 70% 15% $16.4 $10.3 5% $1.4 $28.1 $300 93,596 Sporting Goods & Outdoor Recreation $27.7 $81.9 60% 15% $16.6 $12.3 5% $1.5 $30.4 $375 81,061 Toys & Hobbies $18.3 $56.3 70% 15% $12.8 $8.4 5% $1.1 $22.4 $350 63,924 Miscellaneous Specialty $20.9 $62.8 70% 15% $14.6 $9.4 5% $1.3 $25.3 $400 63,321 General Merchandisers & Warehouse Clubs $410.7 $1,231.4 80% 10% $328.6 $123.1 5% $23.8 $475.5 $475 1,001,042 Full Service Restaurants $167.5 $491.7 65% 15% $108.9 $73.8 5% $9.6 $192.3 $500 384,539 Limited Service Restaurants $114.3 $353.4 80% 5% $91.5 $17.7 5% $5.7 $114.9 $550 208,873 Family Entertainment & Concessions $9.8 $28.9 75% 15% $7.3 $4.3 5% $0.6 $12.3 $175 70,115 Pubs, Bars & Nightclubs $31.4 $89.7 60% 15% $18.8 $13.5 5% $1.7 $34.0 $450 75,513 $100.7 With Supply and Demand being very similar, 6,042,309 square feet versus 5,994,775 square feet, this demonstrates that the PTA, especially the City of Southlake is currently at a retail saturation point. Consistent population growth in the PTA will need to occur to allow for the retail inventory to remain sustainable as new retail projects come to fruition in the PTA (which includes cities such as Westlake, Trophy Club, and parts of Keller and Colleyville, etc.) W 3.0 Retail Analysis Figure 3.20 Retail Inventory vs. Spending :,. . Northwest' o +•' Regional Airport ouble Oak :1171 D ESN T ., Marshall Creek Vict 114 Roanoke TropM G Weuine Lake E` wlsl M Emq%%, DEVELOPMENT STRATEGISTS J ' -l=ox ke � 'I m lower Bellaire °un *43% of the PTA Retail Inventory 2499 m ` .................. , :..... 21% of the PTA 170 I;ry.r ............................... ..... �� .. PTA J Dj5 _121 Retail Spending EXCLUDINGz D 0ve Rd SOUTHLAK 0 26 ke 1377 SOUTHLAKE� =ti rapemne 57% of the PTA �--:,709 Keller -AL�p 14 Retail Inventory A R R tT 114) y Spur . 79% of the PTA nt r"'Bransford" Hall Johnson Rd�� Minters Reta i I Spending o alleyville , Chapel a sVQo(i Blvd Wat Uga .1938 X029' — DFw Airport J ithfield 2s'� 360 0 id Citi Dallas -Fort 41{ NIX[}J wood Rd Worth International X No4h rid_ r Airport r 121. Delving further into understanding Southlake's current retail climate shows that Southlake has almost half of the PTA's organized retail inventory, but only 21% of the retail spending dollars are coming from within the city's boundaries. This means that 79% of the retail spending in the PTA is coming from outside of Southlake. As surrounding cities retail inventory become more mature, there is a risk that in -flow spending from these cities will decrease into Southlake. Large projects such as Entrada and Circle T Ranch, along with expansion in Colleyville will intercept consumers that now travel to Southlake. 75 3.0 Retail Analysis Table 3.6 Trade Area Projected Retail Demand - 2025 M Em"41%, DEVEL©PMENT STRATEGISTS Retail Category AALTA ta' Expenditure STA Sales Capture PTA timated .ofSalesas Misc. Sales Misc.Inflow Inflow Sales Total Sales Sales Per SF Supportable SF Supportable SF New SF 2015-2025 Grocery & Specialty Foods $569.3 $1,837.0 80% 5% $455.4 $91.9 1% $5.5 $553 $580 952,705 181,760 Pharmacy $216.3 $698.1 80% 5% $173.1 $34.9 1% $2.1 $210.1 $754 278,483 53,130 Alcohol &Tobacco $137.0 $447.2 80% 5% $109.6 $22.4 1% $1.3 $133.3 $812 164,043 31,698 Personal Services $220.2 $660.0 80% 5% $176.2 $33.0 1% $2.1 $211.3 $377 560,152 149,640 Department Stores $164.2 $520.3 60% 15% $98.5 $78.0 5% $9.3 $185.9 $406 457,549 84,966 Clothing Stores $414.6 $1,321.1 70% 15% $290.2 $198.2 5% $25.7 $514.1 $464 1,107,439 223,713 Shoe Stores $44.2 $143.3 70% 15% $30.9 $21.5 5% $2.8 $55.2 $522 105,665 12,392 Jewelry Stores $49.4 $150.1 70% 15% $34.6 $22.5 5% $3.0 $60.1 $638 94,179 21,603 Health & Beauty $101.3 $325.8 70% 15% $70.9 $48.9 5% $6.3 $126.1 $435 289,724 69,158 Home Furnishings & Accessories $158.8 $501.3 60% 10% $95.3 $50.1 5% $7.7 $153.1 $348 439,659 108,339 Home Electronics & Appliances $84.8 $274.5 60% 15% $50.9 $41.2 5% $4.8 $96.9 $551 175,806 37,636 Home Improvement & Gardening $126.7 $430.1 70% 15% $88.7 $64.5 5% $8.1 $161.3 $435 370,547 69,125 Books & Multimedia $33.9 $107.5 70% 15% $23.7 $16.1 5% $2.1 $41.9 $348 120,423 26,826 Sporting Goods & Outdoor Recreation $42.3 $134.7 60% 15% $25.4 $20.2 5% $2.4 $48.0 $435 110,308 29,247 Toys & Hobbies $26.8 $87.2 70% 15% $18.8 $13.1 5% $1.7 $33.5 $406 82,560 18,635 Miscellaneous Specialty $29.8 $95.6 70% 15% $20.8 $14.3 5% $1.9 $37.0 $464 79,808 16,486 General Merchandisers & Warehouse Clubs $601.5 $1,923.7 80% 10% $481.2 $192.4 5% $35.5 $709.0 $551 1,286,168 285,126 Full Service Restaurants $255.0 $802.3 65% 15% $165.8 $120.3 5% $15.1 $301.2 $580 519,004 134,465 Limited Service Restaurants $180.5 $594.1 80% 5% $144.4 $29.7 5% $9.2 $183.2 $638 287,088 78,215 Family Entertainment & Concessions $14.5 $46.1 75% 15% $10.9 $6.9 5% $0.9 $18.7 $203 92,288 22,173 Pubs, Bars & Nightclubs $43.7 $133.5 60% 15% $26.2 $20.0 5% $2.4 $48.7 $522 93,198 17,685 TOTALffi 7,666,794 1,672,019 Coming to the conclusion that the City of Southlake is currently at a retail saturation point, the study also looked at future demand of retail space over the next decade. Figure 3.23 calculates the future retail demand in the PTA by factoring household growth, population growth, and an annual sales productivity growth of 1.5%. The amount of Supportable Retail Inventory in the PTA based on spending (retail demand) in 2025 is forecast 7,666,794 square feet. This creates a demand of 1,672,019 square feet of new retail space between 2015 to 2025 in the PTA. If Southlake maintains their 43% retail inventory allocation and annual retail spend, the City could potentially absorb 718,698 square feet of retail space by 2025. Due to Southlake's build -out of approximately 34,000 residents, the population growth and retail spend in later years will need to inflow from outside of the city's boundaries for space to be sustainably absorbed. 9.9 3.0 Retail Analysis Understanding the supply and demand Table 3.7 Lifestyle Center Example Development of the local market, MXD produced an example of a lifestyle center that could be constructed in Southlake using a Propose typical retail mix. . _ This example demonstrates the required absorption needed for each retail category on an annual basis, and the categories estimated year of recovery. The absorption and year of recovery numbers rely on the assumption that no new retail is constructed anywhere else in the PTA during this time period. A 100,000 square foot department store and 150,000 square feet of clothing & accessories would cannibalize retail sales from other stores and retail projects. This does not take into account a destination type department store such as a Nordstrom. Appendix B of this report is the feasibility of a Nordstrom locating in Southlake. Categories such as full service restaurants and home furnishings & accessories would have less of an impact on the current market. PiVl� ' DEVELOPMENT STRATEGISTS Grocery & Specialty Foods 50,000 181,760 18,176 Pharmacy 15,000 53,130 5,313 Alcohol &Tobacco 2,500 31,698 3,170 Personal Services 7,500 149,640 14,964 Department Stores 100,000 84,966 8,497 Clothing Stores 150,000 223,713 22,371 Shoe Stores 5,000 12,392 1,239 Jewelry Stores 10,000 21,603 2,160 Health & Beauty 7,500 69,158 6,916 Home Furnishings&Accessories 15,000 108,339 10,834 Home Electronics&Appliances 15,000 37,636 3,764 Home Improvement & Gardening 5,000 69,125 6,912 Books & Multimedia 5,000 26,826 2,683 Sporting Goods & Outdoor Recreation 15,000 29,247 2,925 Toys & Hobbies 2,500 18,635 1,864 Miscellaneous Specialty 10,000 16,486 1,649 General Merchandisers & Warehouse Clubs 2,500 285,126 28,513 Full Service Restaurants 40,000 134,465 13,446 Limited Service Restaurants 12,500 78,215 7,822 Family Entertainment & Concessions 25,000 22,173 2,217 Pubs, Bars & Nightclubs 5,000 17,685 1,769 2022 2019 1 20191 2021 2015 2018 2017 3.0 Retail Analysis 3.5 IMPLICATIONS According to the supply and demand models, the City of Southlake has currently reached a retail saturation point based on population and inflow spending from surrounding communities. Projects such as Kimball Oaks and Park Village, which are both currently under construction, will take up a large amount of retail absorption in the coming years. The high retail square footage per capita in Southlake (104 square feet per person) creates future risks if and when surrounding communities become more mature in their retail offering, reducing their retail leakage to Southlake. Retail projects in the pipeline in Westlake are likely the greatest risk to Southlake at the moment. Citizens, commercial developers, and brokers believe the retail market has hit the market saturation point for the time being and are satisfied with the current retail offering. As stated by the International Council of Shopping Centers "New retail construction almost always follows the path of new rooftops" - ICSC, 2013, and Southlake has developed 86% of its zoned residential land. Thus, it would be sustainable for the Southlake retail market to concentrate on filling current retail vacancies at centers such as Gateway Plaza, and ensuring that projects under construction are fully leased. Vl�[�-Mqw% P STRATEGISTS 3.0 Retail Analysis Future retail formats built in the City should be focused towards neighborhood centers and quasi -lifestyle centers similar to the Shops of Southlake and the under construction Park Village. These formats are simple to lease, offer competitive lease rates, and match the development style of Southlake. With the changing nature of retail moving towards smaller -scale projects, Southlake is well positioned to continue to maintain a focus towards "quality over quantity". Southlake retail is approaching the retail saturation point and diminishing returns/patronage will result with an expanded retail base (exclusive of certain retail categories). The result from "more of the same" would lead to higher vacancy, lower lease rates, higher tenant turnover, and sales cannibalization between the various projects. There will be future opportunities for retail expansion in Southlake if constructed in a strategic manner that focuses on niche opportunity retail categories. Retail opportunities to expand into in the coming years include full-service and limited -service restaurants, home furnishings & accessories, and health & beauty. %� Ar [�_Mqw% � M,0 �DEVEL®PMENT STRATEGISTS 79 mm,.-O� DEVELOPMENT STRATEGISTS 80 4.0 Office Analysis 4.1 DFW OFFICE MARKET OVERVIEW The post -recession office market in the DFW Metroplex is healthy and benefitting from a declining unemployment rate, an increasing labor force, and employment growth across multiple sectors. At the end of Q1 2014, the year -over -year seasonally adjusted DFW MSA unemployment rate was 5.3%; lower than Texas' state-wide unemployment rate of 5.5% and the national unemployment rate of 6.3%. Year -over -year seasonally adjusted employment growth for the end of 2013 was 2.2% in December, representing a net gain of 66,600 jobs. By February 2014, the year -over -year growth had increased to 2.7%. For the main office tenant sectors, including Professional & Business Services, Financial Activities & Information, 32,000 jobs were added by December 2013; a 4% year -over -year increase. Moody's Analytics forecasts a two-year (Q1 2014 to Q1 2016) DFW annual employment growth rate of 3%. Table 4.1 and Figures 4.2, 4.3 & 4.4 provide a summary of the DFW office market and sub -markets including lease rates, vacancy rates and absorption statistics. IN iVI�V DEVELOPMENT STRATEGISTS RTKL Dallas Figure 4.1 DFW, Texas, and National Unemployment Rates 12.0% 10.0% 8.0% 6.0% 4.0% I I 2.0% II II 0.0% 0 ■ DFW Unemployment Rate Sources: -US Bureau of Labour Statistics - CBRE DFW Office MarketView Q1 2014 - Colliers Intl Q4 2013 Office Dallas/Fort Worth The Knowledge Report 11) 1111111111111111 O N 1_� .--i H .--i 2 2 2 2 2 2! ■ Texas Unemployment Rate ■ United States Unemployment Rate US Bureau of Labour Statistics 81 4.0 Office Analysis Table 4.1 DFW Office Market Summary Q1 2014 piVl� 'DEVEL®PMENT STRATEGISTS Dallas Total 188,591,107 32,891,267 18.1% $20.11 3,226,815 977,687 Fort Worth Total 35,392,863 5,102,267 16.7% $19.53 (163,330) _ 156,622 Dallas/Fort Worth Total 223,983,970 37,994,207 17.9% $20.06 3,063,485 1,134,309 Figure 4.2 DFW CBD & Suburban Office Sub -Markets xsw Far North Richardson/Plano Dallas Lewisville/Denton M North Fort Worth ill 35E Southlake� Las Colinas[ LBJ Freeway t! Preston �tl iei ""' Central Central Expressway IV Stemmons Freeway , -, M1 - !!! JJJJJJ i TS Mid -Cities Uptown/Turtle Creek #19a Dallas CBD Fort Worth - Northeast ++ CBD i Fort Worth 3, ail South Fort Worth 11 Dallas IFS � East Dallas ao X Source: CBRE 82 4.0 Office Analysis In Q1 2014, the DFW region -wide inventory of net rentable office space was 223.91VI square feet across all asset classes. • 188.51VI square feet in the Dallas CBD and sub -markets. • 35.41VI square feet in the Fort Worth CBD and sub - markets. Figure 4.3 Dallas Sub -Market Office Inventory (in sq.ft.) SW Dallas W 1,665,033 Preston Center 3,935,018 Lewisville / Denton 4,833,029 East Dallas 4,851,192 Uptown / Turtle Creek 10,401,976 Central Expressway 11,683,510 Stemmons Freeway 15,381,010 LBJ Freeway 19,735,358 Richardson / Plano 20,755,679 Dallas CBD 1 28,708,081 Los Colinas 1 29,509,524 Far North Dallas 37,131,697 0 10,000,000 20,000,000 30,000,000 40,000,000 Figure 4.4 Fort Worth Sub -Market Office Inventory (in sq.ft.) North Fort Worth = 1,092,400 Northeast Fort Worth � 1,985,291 South Fort Worth 7,163,314 Fort Worth CBD 9,356,230 Mid Cities 15,795,628 0 5,000,000 10,000,000 15,000,000 20,000,000 'PAP iVI�V DEVELQPMENT STRATEGISTS Figure 4.5 DFW Office Asset Classes by Area (in sq.ft.) Class A — 99,448,839 28,467,633 Class B — 134,630,704 10,370,679 Class C26,887,920 5,127,682 0 50,000,000 100,000,000 150,000,000 ■ DFW Suburban Total ■ DFW Downtown CBD Total DFWfreeways. info Sources: CBRE DFW Office MarketView Q1 2014 Colliers Int'l Q4 2013 Office Dallas/Fort Worth The Knowledge Report Transit-orien ted. com RN 4.0 Office Analysis There was 1.1M square feet of net absorption and 5.2M square feet under construction Q1 2014, primarily in suburban sub -markets. There was a total of 3M square feet of net absorption in 2013 for the DFW office market. The Dallas sub -markets experienced 3.2M square feet of net absorption while the Fort Worth sub -markets experienced 163,330 square feet of negative net absorption. DFW office vacancy rates have returned to pre -recession levels and stood at an of 17.9% in Q1 2014. Average office lease rates for the region increased to $20.06 in Q1 2014. Flight -to -quality is a driving factor in tenant relocation and rising lease rates reflect this. IN iVI�V DEVELOPMENT STRATEGISTS Figure 4.6 DFW Dallas Sub -Market Office Vacancy Rate Preston Center Central Expressway Uptown /Turtle Creek SW Dallas East Dallas Lewisville / Denton Far North Dallas Richardson / Plano Los Colinas Stemmons Freeway Dallas CBD LBJ Freeway ® 8.1% 10.5% 11.4% 12.0% 12.4% 12.5% 14.5% 14.9% 16.0% 19.1% 25.5% ■ 27.3% 0% 5% 10% 15% 20% 25% 30% Figure 4.7 Fort Worth Sub -Market Office Vacancy Rate North Fort Worth � 2.0% South Fort Worth � 7.7% Fort Worth CBD 16.1% Northeast Fort Worth 18.2% Mid Cities 22.0% 0% 5% 10% 15% 20% 25% Sources: CBRE DFW Office MarketView Q1 2014, Lauren Paris CBRE Dallas Sr. Research Analyst Colliers Int'l Q4 2013 Office Dallas/Fort Worth The Knowledge Report _ 4.0 Office Analysis 4.2 MID -CITIES SUB -MARKET OFFICE OVERVIEW The Mid -Cities sub -market is part of the Fort Worth portion of the DFW regional office market according to brokerage firm CBRE. Southlake is located within the Mid -Cities sub- market. There is approximately 15.8M square feet of total office inventory in Mid -Cities sub -market; nearly half of the Fort Worth office market. Only 71,487 square feet of office space was the net absorption for the Mid -Cities in Q1 2014; 0.5% of the total office inventory. The Mid -Cities vacancy rate is currently the highest of the Fort Worth office sub -markets and it has the 3rd highest rate of the overall DFW region. Lease rates in Mid -Cities are lower than the Fort Worth average and the 5t" lowest in the overall DFW region. Table 4.2 Mid -Cities Office Market Summary Q1 2014 'Papa iVl�� DLVLL©PMLNT STRATLGISTS 45 of Fort Worth's Office Market Southlakej�'" , fe of the total DFW Office Market ,,/ zE_ _191V Mid -Cities 45 % of Fort Worth's —_mss Q1 2014 Absorption ' E 6 % of the total DFW Q12014 Absorption > Mid -Cities 15,795,628 3,475,038 22% $17.48 (133,913) 71,487 Fort Worth Total 35,392,863 5,102,267 16.7% $19.53 (163,330) 156,622 Dallas/Fort Worth Total 223,983,970 37,994,207 17.9% $20.06 3,063,485 1,134,309 Sources: CBRE Dallas/Fort Worth Office MarketView Q1 2014. Transwestern / Delta Associates Dallas/Fort Worth Outlook Year -End 2013 Colliers Int'I Q4 2013 Office Dallas/Fort Worth The Knowledge Report 4.0 Office Analysis Most office properties in Mid -Cities are located along major roads and highways and in the central areas of local municipalities, including Arlington, Southlake, Bedford, and the North Richland Hills area. Office building typologies in the Mid -Cities include: ® Large Corporate Office Buildings ® Office -over -Retail Main Street Buildings • Office -Industrial Flex Spaces in Industrial Parks and Freestanding Properties. • Small Office Buildings (Freestanding, in Business Parks & Retail Plazas) Medical -office space is interspersed throughout the region and is typically found in commercial areas amidst retail businesses, as well as in the vicinity of hospitals and regional health centers. �iVl� ' DEVELOPMENT STRATEGISTS Loopnet.com Sources: CBRE Dallas/Fort Worth Office MarketView Q1 2014. Transwestern / Delta Associates Dallas/Fort Worth Outlook Year -End 2013 Colliers Int'I Q4 2013 Office Dallas/Fort Worth The Knowledge Report GoogleMaps.com 86 4.0 Office Analysis 4.3 SOUTHILAKE OFFICE OVERVIEW The City of Southlake is located within the Mid -Cities office sub -market of the DFW region office market. There is 3,291,883 square feet of office space in Southlake as of May, 2014. Two notable features of the Southlake office market include the presence of the corporate headquarters of Sabre Travel Network, maker of the world's leading travel industry software suite, and Southlake Town Square with its offices over retail in a walkable modern heritage main street district. Most of Southlake's office space is located adjacent to Hwy 114, north of Ira E Woods Avenue in the eastern quadrant of the city, TW King Road, and along Southlake Boulevard and in Southlake Town Square. Office building typologies in the Southlake reflect the broader Mid -Cities sub -market and can be grouped into four main categories: • Large Corporate Office Buildings • Office -over -Retail in 'Modern Heritage Main Street' Buildings in Southlake Town Square • Office in Industrial -Flex Buildings • Small Office Buildings (Freestanding, in Business Parks & Retail Plazas) The following page displays these office building typologies in visual form. �iVl�[�_Mqw% �DEVEL®PMENT STRATEGISTS Sabre Travel Network 4.0 Office Analysis Large Corporate Office Buildings 100 Ore Office -over -Retail in 'Modern Heritage Main Street' Buildings in Southlake Town Square L or 7L O,MPNiVl�DLVLLOPMLNT STRATEGISTS Office in Industrial -Flex Buildings Small Office Buildings (Freestanding, in Business Parks & Retail Plazas) 17. V2— ,Ar ro - ss 4.0 Office Analysis Within Southlake, there are a small number of office properties are currently for sale: • A small office building with tenants in an office park near Southlake Town Square is available for $2,950,000, or approximately $175 per sq.ft. • A 4 acre redevelopment site zoned medical -office % of a mile from the highway is available for $1,250,000, or approximately $312,000 per acre. • A 1/3rd acre pad zoned for office in a business park is available for $178,000; approximately $575,000/acre or $60/sq.ft. of buildable office density. Office space above retail in mixed-use buildings in Southlake Town Square have the city's highest office lease rates. They are seen as highly desirable offices with a strong amenity package. Office space in Industrial Flex buildings have the lowest lease rates in Southlake, however they are much more basic in their fit -out and their amenity packages are much lower than in Town Square. Small offices located in plazas, office parks, and free-standing buildings lease at rates in line the DFW average. Sabre continues to push their "Flexspace" model which decreases the amount of space required per employee. This reduces the need for the company to expand into another building in the future. Sources: - Loopnet.com 02/05/2014 M�� DEVELOPMLNT STRATLGISTS Table 4.3 Southlake Office Leasing Market Summary Large Corporate Office Buildings $23.88/sq.ft. 97,882 sq.ft. 681,376 sq.ft.. Southlake Town $30/sq.ft. 5,517 sq.ft. 59,356 sq.ft. Square Offices Office in Industrial Flex $11.98/sq.ft 4,524 sq.ft. 32,443 sq.ft. Small Office Buildings $20.32/sq.ft. 3,247 sq.ft. 136,659 sq.ft Source: Loopnet.com, 02/05/2014 _ 4.0 Office Analysis 4.4 SOUTHLAKE OFFICE DEMAND 'Ed M, DLVLL©PMLNT STRATLGISTS Prior to running an office demand model, the study further analyzed the office vacancies in Southlake, whch reflect the moderately high rate of 22% for the larger Mid -Cities office submarket. The 1 Kirkwood building, formerly occupied by IBM currently sits empty and accounts for a large portion of the available office space in Southlake. The prestige offices at Southlake Town Square are approximately 20% vacant. The Southlake vacancy rate as of May 2014 stands at approximately 19% with 620,000 square feet of space. Removing the 380,000 square foot 1 Kirkwood building reduces the vacancy rate to approximately 8.5%, displaying the effect the Kirkwood building has on the office market. Although an 8.5% vacancy rate is quite healthy for a suburban office market, the limited absorption over the past eight years in the Mid -Cities region tempers the amount of space required for future demand, not only in Southlake, but the Mid -Cities as a whole. Figure 4.8 Mid -Cities Office Absorption Rate 400,000 300,000 v LL CU 200,000 M r 100,000 Ln 0 0 CL 0 -100,000 LA Q _200,000 N Q) j -300,000 5 -400,000 -500,000 1 2006 2007 2008 2009 2010 2011 2012 2013 Source: CBRE, 2014 90 4.0 Office Analysis ,r DEVELOPMENT STRATEGISTS The MXD office demand model employs two methods to arrive at its final number, historic annual market absorption and projected employment office demand. By using methods that investigate both the past and future, the office model is able to provide more accuracy moving forward. The average annual absorption rate over the past eight years in the Mid -Cities is only 15,058 square feet according to CBRE. Removing the two anomalies of the recession (2010 & 2011), the average absorption rate is 140,781 square feet which was used for the model. Southlake currently has 21% of the total office market share in the Mid -Cities and was used as the assumption for the total annual absorption in the demand model. Other assumptions in the office demand model was an office growth rate of 2%, annual market absorption growth rate of 2%, and that new office employees require 200 square feet of space. These assumptions were made using current DFW/Texas trends. Table 4.4 Mid -Cities Office Absorption Rate IL Absorption (SF) 306,612 157,052 134,327 231,519 -343,462 -380,763 149,088 -133,913 Source: CBRE, 2014 Table 4.5 Southlake Office Demand Model Year 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 Historic Annual Market Absorption (SF) 29,339 29,926 30,524 31,135 31,757 32,393 33,040 33,701 34,375 35,063 35,764 36,479 Projected Employment Office 31,200 31,824 32,448 33,072 33,696 34,320 34,944 35,568 36,192 36,816 37,440 38,064 Demand (SF) Market Absorption & 30,270 30,875 31,486 32,103 32,727 33,356 33,992 34,635 35,284 35,939 36,602 37,272 Employment Demand Avg (SF) Cumulative Demand (SF) 30,270 61,144 92,631 124,734 157,461 190,817 224,809 259,444 294,728 330,667 367,269 404,541 Total Office Demand for Southlake 2014 to 2025 = 404,541 square feet 4.0 Office Analysis 4.5 IMPLICATIONS There currently is a limited demand for mixed-use prestige office, such as those at Town Square. Although the product is high quality and offers a strong amenity package, the lease rates are too high for most tenants to make it work economically on their end. Town Square's continued vacancies and low absorption attest to this ongoing trend. Most tenants are preferring the more affordable suburban multi -tenant garden -style office that is cheaper to build, thus lease rates are more affordable. This format, along with industrial -flex are the simplest to lease out and absorb into the market. Suburban office space in the Mid -Cities has had slow absorption over the past decade, thus demand figures are low moving forward. Constructing speculative multi -tenant office space can be risky. Until absorption figures rise, build -to -suit is a safer investment. The 96,000 square foot office planned for Kimball Park will take up a large amount of absorption in the coming years. This will reduce the need for multi -tenant office in Southlake even more. Larger campus office can be constructed build -to -suit, however the I Kirkwood building is vacant and requires a tenant. Southlake should be conservative in the amount of spec multi -tenant office approved and constructed in the city, until absorption stabilizes and demand in the Mid -Cities grows. Building too much, too quickly can lead to increases in the vacancy rate. �iVl�[�_Mqw% �DLVLL®PMLNT STRATEGISTS The focus in Southlake should be towards "quality over quantity" with incremental growth of the multi -tenant garden -style office, and large scale built -to -suit campus offices for tenants looking at making Southlake their long- term home such as what has occurred with Sabre. A higher amount of office space would allow for further demand for retail, restaurants, and services, but only if it is leased out and not sitting vacant. The strong demographics, schools, amenity package, highway access network, and close proximity to DFW Airport will continue to attract business to Southlake. mm,.-O� DEVELOPMENT STRATEGISTS 93 _ 5.0 Changing Nature of Retail M Em"4%, DEVELOPMENT STRATLGISTS 5.1 Retail & Lifestyle Prior to reaching the recommendations, MXD analyzed the current and upcoming trends in retail and demographics across the United States to understand how the retail industry is changing. The retail industry in North America has been affected by rapid changes in technology and recent tough economic times. Increasing sales on the internet mean that bricks -and -mortar retail is changing. Online sales are growing at approximately 10% annually and are expected to reach $370 billion by 2017 according to Urban Land Institute. Although there was doom and gloom previously for bricks -and -mortar retail with the emergence of online, the sector now understands that both are extremely important to future viability. Gen -Y is becoming the target for retailers (those between the ages of 13-30 as of 2014), as their spending power is projected to account for nearly one-third of total retail spending by 2020 according to McKinsey & Company. Gen -Y is fond of shopping and dining out, but focuses more towards the unique. They prefer to shop in smaller locally -owned boutique shops, even if the goods are more expensive than national brands. An example of this in Southlake is Tyler's. Baby boomers are the largest demographic in the U.S. (20% of the population) and are beginning to reach retirement age. Baby boomers will be downsizing from their large single-family homes as the children leave the nest, to smaller units such as condos, rowhouses, and townhouses. There will also be a greater demand for services and medical facilities. FA ) a 1 10M 5.0 Changing Nature of Retail Retailers themselves are anticipating these demographic and spending shifts by attempting to be pro -active. Tenant mix and floor plans are changing to stay sustainable for the future. Retailers have been generally downsizing their store sizes as requirements for storage space and floor space have reduced, due to both online pressure as well as just -in -time delivery. The physical spaces are increasingly becoming showrooms for new product. Formulaic strip centers and enclosed malls are making way for unique neighborhood and lifestyle centers, small format retail is now seen as the the new "beautiful". The variety of tenants are also changing to include organic grocers, specialty food, wines stores, restaurant clusters, outdoor lifestyle, and health & wellness components such as yoga studios. Infill properties that are in highly -trafficked areas and have "good bones" are perfect for re -positioning. There are many first -generation retail centers constructed between the 1970's and 1990's that need upgrades or complete re -developments. In Southlake's case, Gateway Plaza could be a prime infill re- positioning property in the next several years. 'Papa M, DEVELOPMENT STRATEGISTS 9 5.0 Changing Nature of Retail 'Papa M, DEVELOPMENT STRATEGISTS 5.2 RESTAURANTS & ENTERTAINMENT Restaurants are the most dynamic retail category, with the sector shifting away from national chain restaurants, towards artisan and locally sourced focused restaurants and bars. New dining concepts that focus on organic, local, diet -sensitive and "foodie behavior" create dining destinations. The entertainment sector is seeing hybridization of concepts to create unique interactive experiences. Entertainment should provide a interactive experience, but still offer the ability to socialize with family and friends. This includes board game cafes, ping pong bars, movie theatre bars, bowling alley restaurants, and music venues that serve as pop-up shops during the daytime. These emerging trends require current and new developments to be adaptable and flexible in their development program and mix, so they are able to stay relevant and have a lasting & sustainable consumer base. U 96 rog RECOMMEND Vl�[�-mqw% p STRATEGISTS \I[t 97 6.0 Recommendations 6.1 INTRODUCTION Recommendations for the City of Southlake are split into three targeted categories, as viewed in Figure 6.1: ® Southlake Residents • Office/Daytime ® Regional/ Destination Several of the development and land use recommendations are targeted across multiple categories. Each recommendation lists its primary target market, recommended locations, further details, and supportable square footage (if applicable). These recommendations were generated from the retail and office supply and demand analyses, speaking with City Staff, stakeholder input, and researching trends in the DFW Metroplex among other variables. Since it has been found that retail is at a saturation point and demand will be low moving forward, these recommendations look at very strategic niche clusters that anticipate voids in the market. The recommendations then transition into top priority projects and policies, where the most immediate attention should be paid. �iVl� ' DEVELOPMENT STRATEGISTS rr r■r rr r r ■S■» )IN No ONE 41 a■■� ,' ism ■■■■MIN Vli: 1 11 A ,� tLi III OWN ■■ Southlake Residents \ office/Daytime \ Regional/Destination Full-service & Limited -service Restaurants Health, Beauty & Wellness Specialty Grocery House & Home retail Culinary Hub Full-service & Limited -service Restaurants Specialty Grocery Campus office (Build -to -suit) Suburban multi -tenant garden office Medical/Wellness Hub Full-service & Limited -service Restaurants House & Home retail Culinary Hub Performing Arts Venue & Entertainment Center Medical/Wellness Hub 6.0 Recommendations 6.2 Full-service & Limited -service Restaurants Target Markets: • Southlake Residents • Office/ Daytime • Regional / Destination Recommended Locations: • Southlake Boulevard Corridor • Carillon Site • Dove Road & 114 Site • 114 Frontage Roads Details: • Unique independent restaurants • Micro -Restaurant cluster • Farm -to -table organic & Artisanal food • Culinary destination Supportable Square Footage (2015-2025): • Full-service — 54,000 sq. ft. • Limited -service — 31,000 sq. ft. 'Papa iVl�� DLVLL©PMLNT STRATLGISTS 100 6.0 Recommendations 6.3 Specialty Grocery Target Markets: • Southlake Residents • Office/ Daytime Recommended Locations: • Carillon Site • Dove Road & 114 Site Details: • Organic/Local • Specialty foods • Juice Bar • Dine -in or Take -away house made prepared foods • Artisanal Cafe • Wine & Cheese from around the globe Supportable Square Footage (2015-2025): • 15,000 to 25,000 sq. ft. 'Papa iVl�� DLVLL©PMLNT STRATLGISTS 6.0 Recommendations 6.4 Health, Beauty & Wellness Target Markets: • Southlake Residents Recommended Locations: • Carillon Site ® Dove Road & 114 Site • Southlake Boulevard Details: • Salons & Beauty Parlors • Spas • Cosmetic Treatments • Fitness Training / Gyms • Yoga Studios Supportable Square Footage (2015-2025): • 28,000 sq. ft. 'Papa M, DLVLL©PMLNT STRATLGISTS 6.0 Recommendations 6.5 House & Home Target Markets: • Southlake Residents • Regional / Destination Recommended Locations: • Dove Road & 114 Site • Carillon Site • 114 Frontage Roads Details: • House & Home Retail Cluster • Furnishings & Appliances • Home Design Showrooms • Interior Designer Offices • Smart Home Technology Supportable Square Footage (2015-2025): • 43,000 sq. ft. 'Papa iVl�� DEVELOPMENT STRATEGISTS 6.0 Recommendations 6.6 Culinary Hub Target Markets: • Southlake Residents • Regional / Destination Recommended Locations: • Dove Road & 114 Site • 114 Frontage Roads • Carillon Site • 114 & Kirkwood Boulevard Details: • Farm -to -Table Community Food Hub • Farmers Market • Indoor Event Hall (Weddings, Community/Corporate events, fundraisers • Specialty food retailers • Restaurant • Commercial Grade Kitchens • Culinary Business Incubator on short-term leases from which to launch food -based businesses. Supportable Square Footage (2015-2025): • Economic Development & Tourism Project m "'l Pam' DEVELOPMENT STRATEGISTS 108 6.0 Recommendations 6.7 Performing Arts Venue & Entertainment Center Target Markets: • Regional / Destination Recommended Locations: • Carillon Site ® Dove Road & 114 Site • 114 Frontage Roads Details: • Theatre stage for live performances, concerts, and comedy shows • Destination restaurant • Specialty retail • Boutique hotel • Conference facilities Supportable Square Footage (2015-2025): • Economic Development & Tourism Project 'Ed M, DLVLL©PMLNT STRATLGISTS 110 6.0 Recommendations Recommended Boutique Hotel Chain Operators: j aidtisb� 1 e de vi vrec!) j o HOTELS RESTAURANTS SPAS hotel Cq INDIGO,, Eam M,-,O� DEVELOPMENT STRATEGISTS AMES hotels & restaurants 7r7 I ACE HOTEL BY WYNDHAM Ic MUSEUM HOTEL 111 6.0 Recommendations 6.8 Medical/Wellness Hub Target Markets: • Regional / Destination • Office/ Daytime Recommended Locations: • Carillon Site • 114 Frontage Roads Details: • Doctor's offices • Specialized medical practices • Medical Research / Scientific Laboratories • Research & Development • University satellite medical campus • Medical Training • Just -in -time medical equipment Supportable Square Footage (2015-2025): • Economic Development Project -14 J 0 k WA 4h J 'Papa iVl�� DEVELOPMENT STRATLGISTS N, 13 6.0 Recommendations 6.9 Campus Office (Build -to -suit) Target Markets: • Office/ Daytime Recommended Locations: • Kirkwood Boulevard • 114 Frontage Roads Details: • Corporate Headquarters & Regional Offices • Finance, Insurance, & Wealth Management • Information Technology & Media • Corporate Energy Services • Bio -Technology • Pharmaceuticals Supportable Square Footage (2015-2025): • Economic Development Project 'Papa M, DEVELOPMENT STRATEGISTS ■I�RCRRIi; 115 6.0 Recommendations 6.10 Suburban Multi -Tenant Garden Office Target Markets: • Office/ Daytime Recommended Locations: • E Continental Boulevard • Kimball Avenue • Crooked Lane Details: • Professional Services • Accountants • Engineers/Planners/Architects • Information Technology • Lawyers • Advertising & Media • Management Consulting • Actuary's Supportable Square Footage (2015-2025): • 405,000 sq. ft. 'Papa iVl�� DLVLL©PMLNT STRATLGISTS 117 Arl��' 6.0 Recommendations °EWEL°PMENT STRATEGISTS 6.11- TOP 5 PRIORITY POLICY RECOMMENDATIONS 1. Reduce cannibalization of tenants between Southlake's retail properties by slowing the growth of new retail developments in the City, while ensuring older retail properties maintain low vacancies. "Quality over Quantity of Tenants". 2. Focus on creating a niche destination project on the Carillon site, which may include less retail than was originally planned. 3. Introduce more unique independent restaurants to the Southlake market through "culinary clusters". 4. Work with commercial developers to allow more flexibility with plans while still maintaining a high level of urban design standards to ensure that the constantly shifting demands from retail, office, etc. are being met. 5. Create a standard incentive structure that is transparent to the commercial development community. Arl��' 6.0 Recommendations °EWEL°PMENT STRATEGISTS TOP 5 PRIORITY POLICY RECOMMENDATIONS • Reduce cannibalization of tenants between Southlake's retail properties by slowing the growth of new retail developments in the City, while ensuring older retail properties maintain low vacancies. "Quality over Quantity of Tenants". • Investigate the implementation of a "Discretionary Zoning District" that would require Council -established conditions to be met for a building permit to be issued. • Discretionary Zoning District By-law would include a series of conditions against which development proposals would be tested for compliance. • Based on retail absorption projections completed by MXD, establish retail square footage ceilings for the Discretionary Zoning District to contain retail development at sustainable levels. • Urban Design Standards could be included in the series of conditions, which is an important policy initiative already successfully implemented in the City. • Strategic incentives would be available for sites within the Discretionary Zoning District to encourage future commercial development towards viable/targeted land uses. 120 Arl��' 6.0 Recommendations DEVELOPMENT STRATEGISTS TOP 5 PRIORITY POLICY RECOMMENDATIONS • Focus on creating a niche destination project on the Carillon site, which may include less retail than was originally planned. • Niche retail clusters include health, beauty & wellness; house & home; specialty grocery. Complementary uses include a performing arts venue & entertainment center, and boutique hotel. • Helms Bakery District in Los Angeles is a strong case study to use as a model for niche destination retail. • Helms Bakery District has award-winning restaurants, a unique collection of design and home furnishing stores, showrooms, a theatre, and museum. Twelve retailers and three restaurants have created a center for home furnishings, creative offices, and the arts. • Project can be phased over time to meet market demand. 121 mm,.-0� 6.0 Recommendations °EWEL°PMENT STRATEGISTS TOP 5 PRIORITY POLICY RECOMMENDATIONS • Introduce more unique independent restaurants to the Southlake market through "culinary clusters". • Incentivize developers to create clusters of unique, upscale and independent restaurants that becomes a destination on its own. • Micro -restaurant clusters can charge rents for small spaces that are affordable to the operators, but on a per square -foot basis, are higher than those for the much larger space used by typical restaurants. A "fixed location" take on the food truck trend. Works for culinary start-ups, as well as existing restaurant owners who want to experiment with new food concepts. • Farm -to -table Community Food Hub would be centred around a permanent location for a farmers market to help establish and maintain relationships between vendors and customers. Would include an indoor event hall that would be available for rent, and a commercial grade kitchen for catered events. • Food Business Incubator that would be available for short-term lease to entrepreneurs to launch new food -based companies, develop new food concepts, and streamline the manufacturing process. Non-profit model in which the facility is viewed as an economic development & social enterprise tool that will receive support through grants and low-cost leases. mm'.-0� 6.0 Recommendations DEVELOPMENT STRATEGISTS TOP 5 PRIORITY POLICY RECOMMENDATIONS • Work with commercial developers to allow more flexibility with plans while still maintaining a high level of urban design standards to ensure that the constantly shifting demands from retail, office, etc. are being met. • Establish a streamlined variance / building permit amendment process to enable approved projects to respond to changes in market demand prior to construction. • This would help ensure that future developments are tailored to market demand, are "right - sized" for the community, and avoid the consequences of over -building within a certain sector. • The amendment process would have to be transparent, and should not be viewed as a substitute for careful project planning at the time of building permit application. 6.0 Recommendations TOP 5 PRIORITY POLICY RECOMMENDATIONS '%� Ar i�71001%6 0,g M'. 0 �0 STRATLGISTS • Create a standard incentive structure that is transparent to the commercial development community. • Create a "menu" of incentives relating to the approvals process and project cost for commercial developments that will incentivize developers to build land -uses that meet the goals of the City and create a sustainable development landscape. Table 6.1 Approvals Process Incentives Approvals ProcessImpact A single applicant -focused point of contact with the muncipality for all stages of the application Simplifies and expedites "One -Stop -Shop" / "One Window" process: inquiries, rezoning interaction between the Low application, building permit applicant and municipality application, variances and amendments A municipal commitment to give Expedited application process priority to applications within a encourages uptake of projects Expedited permit approval specific district or those Low within target area and adoption possessing certain eligibility of prioritized criteria criteria Fixed application review timeframe offers predictability Guaranteed Application Review Commitment to a fixed and simplifies project Low Timeline application review timeframe. management through potential cost savings. 6.0 Recommendations TOP 5 PRIORITY POLICY RECOMMENDATIONS O'g M'. 0 �0 STRATEGISTS • Create a standard incentive structure that is transparent to the commercial development community. • MXD recognizes that several of these incentives listed in Tables 6.1 and 6.2 have already been implemented in Southlake. These tables are used to demonstrate six of the most popular development incentives currently employed in North America. Table 6.1 focuses on the Approvals Process, while Table 6.2 focuses on Project Costs. Table 6.2 Project Cost Incentives Project CostImpact Permit and review fees may be Lowers permit costs for eligible frozen or waived entirely for applicants and encourages Permit Fee Freezes &Waivers Low -Medium eligible applications in targeted development uptake in targeted district(s). district(s). Municipal grant provided to applicant for use in project Ensures muncipal urban design Beautification Enhancement Grant Low -Medium beautification and compliance guideline adherance and with municipal design guidelines encourages beautification Eligible projects receive property Encourages new development, tax abatements for a set period of renovations, and expansion Tax Abatements, Credits & Refunds time and/or may receive sales tax within the municipality and acts Medium -High credits and refunds for local taxes as a strong attractor for paid on construction materials businesses to locate in the and services. community. p i .,mooDEVEL©PMENT STRATEGISTS 126 mm'..00 ' Appendix A — Commercial Development Incentive Case Studies L)EVEEOPMENT STRATEGISTS CITY OF AUBURN WASHINGTON BUSINESS INCENTIVES CITY-WIDE INCENTIVES: ■ No local Business and Operations taxes ■ Permit Review Fees frozen to 2009 levels ■ 50% Reduction in Development Fees for small businesses that start up in Auburn or relocate to it ■ Construction Sales Tax refund of up to $100,000 on new commercial construction projects ■ System Development Charge Credits can be banked and transferred to new commercial development sites ■ Deferral of Impact and System Development Charges until building occupancy ■ 50% Business & Occupation Tax Credit for Customized Workforce Training Programs delivered by local colleges ■ Efficiency incentives for large volume water users and credit for on-site water treatment and re -use ■ Staff may be able to assist with applications for incentives, credits and grants from senior governments % Ar [�_Mqw% P M,.00 Appendix A — Commercial Development Incentive Case Studies DEVELOPMENT STRATEGISTS CITY OF AUBURN WASHINGTON BUSINESS INCENTIVES ■ "One -Stop" Permit & Business Start -Up Center • Inventory of available sites and buildings • Informal Pre -Application Review Option • Early Site Review • Current traffic counts • Current vital statistics ■ Downtown Urban Center Incentive District • Expedited Design Review • Expedited Environmental Impact Review • Storefront Fagade Improvement Grants • Storefront Art Program • Eligibility for the Federal New Market Tax Credit ■ Auburn Junction Redevelopment Incentive District • Traffic Impact Fee Waiver • Expedited Design Review ■ Innovation Partnership Zone Incentive District • Access to a $29.5 million dollar grant fund • Waiver of requirement to underground aerial utilities 128 '% Ar [�_Mqw% P M'.00 Appendix A — Commercial Development Incentive Case Studies DEVELOPMENT STRATEGISTS CITY OF TULSA RETAIL INCENTIVES POLICY ■ Purpose of the policy is to provide criteria for identifying situations where it is desirable and suitable to provide incentives for private development in the retail sector. ■ Policy is intended to support commercial retail business that increases sales tax revenues, enhances property values within the City, contributes to the economic well-being of the City's residents, diversifies the local economy and participate in public private partnerships to provide enhancements to public infrastructure. ■ Each potential project may have different needs and each incentive will be tailored to each particular project. ■ Economic development tools include, but are not limited to sales tax reimbursement, tax abatement, tax increment finance districts, investment in infrastructure and lease of publicly owned facilities or sites. ■ To receive incentives from the City, a Retail Incentives Proposal must be submitted to the Planning and Economic Development department. 129 mm'. -00 ' Appendix A — Commercial Development Incentive Case Studies L)EVEEOPMENT STRATEGISTS CITY OF MEDICINE HAT DOWNTOWN DEVELOPMENT INCENTIVE PROGRAMS ■ Commercial property owners can access up to $50,000 to do major renovations or new construction of a commercial building in the downtown. ■ Eligible costs covered by grant include offsite levy fees, environmental assessment, architect and engineering fees, servicing upgrades, permit feeds and landfill tipping fees. ■ Commercial property owners can access up to $15,000 for facade and architectural exterior building improvements. ■ Eligible costs covered by grant include permit fees, awnings and general repair or replacement of exterior of building. ■ Funding is available on a first-come first-served basis, with a cheque issued upon product completion. ■ The goal is to generate quality commercial space resulting in more activity and growth opportunities for business in the downtown. ;P�. 0 . "INCENTIVE PROGRAMS Put Your Plain. . i i I 130 mm,.-O� DEVELOPMENT STRATEGISTS 131 �iVl� ' Appendix B - Nordstrom Store Location Analysis �DEVEL®PMENT STRATEGISTS Future Nordstrom Store Location Analysis Introduction ■ Nordstrom offers full -line department stores, Nordstrom Rack off-price stores and specialty stores. ■ Currently, the City of Southlake is served only by a Nordstrom Rack store. ■ On average, a Nordstrom full -line department store is 150,000 SF and serves as an anchor for regional shopping center destinations. ■ North East Mall Nordstrom department store location is the closest to Southlake (10 miles southwest) and the only location serving the west side of the DFW metropolitan area. ■ Nordstrom is known to stimulate leasing activity among upper -tier specialty tenants and increase a shopping center's image, regional attracting power and sales productivity. ■ Nordstrom is known to locate in super -regional and regional enclosed malls that are located along major highway systems. LN] NORDSTROM 132 �V Appendix B — Nordstrom Store Location Analysis DEVEL©PMENT STRATEGISTS Nordstrom Full Line Store Locations in the DFW Metroplex C6, nth ".,,4 - ir�a�i Argyle Lekel falias Ht�hiar�c1 a Junin Villr}ge Fr C lv y l �wi Kurile Flower Mound Northwest Carrollton Haslet — "� ial i :Carroll#nn coppe II Feller Gra pevinP Earn-mers Branch �Je Eagle r ial hAounugin L'011eyv a —` SagiriBw a6l It t - Nwh Bedford E�IIes.s Ip:l �yfi rt Richland l I North East Mall Iwing Haltom City �'lhile Settlement Fort Worth9 . (;.rami F'r�irle 0 i Arlingtori r Lucas b Murphy ' 'Wylie ,9c Sac Ric hirdsun •_ is Dallas w Garland �L�ehe High laniis Univy I� NorthPark Center lieatn Dallas Sunnyvale Mesquite Oak C' f Bi!rh r:r nq5; Forrr+ Urban/SubuVan Complementary stores—. D!Ilard's, Sephora, Barnes & Noble, Best Buy, Banana Republic, Pier North East Mall Upscale Enclosed Regional Shopping Mall Suburban 1 Imports, Victoria's Secret, Dick's Sporting Goods Macy's, Belk, Pottery Barn, Sephora, Banana Republic, Victoria's Galleria Dallas Upscale Enclosed Regional Shopping Mall Suburban Secret, Zara NorthPark Center Upscale Enclosed Regional Shopping Mall Urban Macy's, D!llard's, Neiman Marcus, Nike, Banana Republic, H & M Macy's, Dillard's, Dick's Sporting Goods, JC Penny, Sears, Apple, Stonebriar Center Mid -Range Enclosed Shopping Mall Suburban Banana Republic, Barnes & Noble 133 Appendix B - Nordstrom Store Location Analysis Future Nordstrom Store Location Analysis Current Distribution of Nordstrom Stores and Nordstrom Target Market 3. The northwest quadrant of the Metroplex has a significantIL -� -- • • number of Nordstrom target market residents but not as much as n CS the south side, and also these residents have greater existing 'a ® • , accessibility to a Nordstrom store. "" • ® Q " The Nordstrom shopper profile was a * • initially estimated for each Census • a0 Blockgroup using data on _ „ 0 • Department Store Spending Per - ® • Capita, available from Claritas. _ • • - ILII • • 4 However, this does not reflect ° Nordstrom's upmarket positioning. Instead the Number of Households • • ` r t • $ r' Earning $100,000+/Year was used to " ® • • ;:;>� estimate the number of Nordstrom ° • a @ Shoppers present in each Census `®- ,.,dap • * • Blockgroup. " + • • • ', 1 ° Cb •aa # • ggam�,,, € Households Earning $75,000 to ®• s $99,999/Year are also likely to •,.�, „ ' include Nordstrom shoppers, but this • �` n'a'-#. ,� • �; a income group is highly correlated • •� t; ® • • ' ' " with the $100,000+/Year • =�w r„® • tq w�_�� • ,e • .,y. • . demographic and also would make ® ••. .a * 9 �;;4, significant expenditure at more middle -market Department Stores. 3, • '� �. • as w. P " The current distribution of Nordstrom ® ® ` ®W W`'� • '•. °� ` off• ' • stores vis-a-vis the distribution of ® a • w" *'� Households Earning $100,000+/Year �+ `• S * • 0 *set indicates that this is an effective• / • e • ® • • e w • • 0.40 estimate of Nordstrom's Target �(• o• • • "'""" • • r Y' + • r o • a • Market. S.• ` f. OExisting Nordstrom Store ONordstrom Target Market • 2. A number of Nordstrom target shoppers also live on the south side of the Metroplex, yet they have to travel a significant distance to reach a Nordstrom store. 'Ed M, DLVLLOPMLNT STRATLGISTS ° 1. The largest concentration of Nordstrom target o shoppers and stores is located in the northeast of the Metroplex. • • 134 Appendix B - Nordstrom Store Location Analysis Future Nordstrom Store Location Analysis Future Nordstrom Store Trade Areas (Once an Arlington Store is Operational) Trade Areas were identified for each of the Nordstrom locations, +� • based on which location was closest to each target market�* 0 � ° . � s ° • 0 Fns neighborhood. r, ° @e • • S C) ID The Northeast Mall's trade area spans a large geographic area, and for ° L, many customers, this represents a significant commute to reach the store. 0+*i�:� ° .�:t� ! • CLJ M/� G] a 6 =. uiencri 0 Q:mn. ppm _ �• °o @ o J-1 O 0 40 ci ��.� 1 CJ��,} r (,FevPre o rr•' h- ° ( Lf 'o 0 fi•;, JF& u.60 o .0 0 0t Cb 6 ID C • 0 09 .G ... -�JASc3 �ibo- a 7, ° �P. aoO° �! jg�6) @^JpW`L f`_l Qw D o y. O • ��I� ^ � t�o'voo..p�o7t� _. �• � d' a � ®© ° Fi a o 0 QQ 1 i'94 . 'gnwu,y .y p 4 c YRS Lry, d® Q • .: 0 °= @4! p°. ®RD may°`" `J J _• � m _ ®p6G P. -"tel z;' Y�°�: °.°n `'� � nlnq�oy� ' ar,�C�+P • �, ioa X00 g°cam=ep•°p C) Pw �¢@? O Q °y !r° ell6° �� D 0 0. c, m00 00 � IN M,0�0 DEVELOPMENT STRATEGISTS • Si s ° e � �1 00 O 63 O w,n @ ° @ I i © 0 • � ab � e - c � a • Ooh° o s a di°r5' '2, {� Q �`, 0 O d° �b b J 0 O m =6 • q � Q m • OExisting Nordstrom Store ONordstrom Target Market @ 135 i �V Appendix B - Nordstrom Store Location Analysis L)EVEI_©PMENT STRATEGISTS Future Nordstrom Store Location Analysis The Most Strategic Location for the Next Nordstrom Store in Dallas -Fort Worth Fn,.W op.'I to Q: Where is the best location in Dallas -Fort 1. A Southlake Nordstrom store would n " ° k • ° �q�q o c' Worth to locate the next Nordstrom store? benefit from strong local demographics °®Q r-er n �rl_l (D 000 °o o w o but would not have the greatest impact `=. ° �° a o " ° a 006 ' %0 o A: The best new location is the one that on the Nordstrom store network's vim? ' ° , %� m° a 0000 ° d reduces the average travel time it takes for overall accessibility to its target market °0 a ¢ ° ®� p Q o r> -.Ssrr"s o C! �t ° oQ®d °a o O G people that fit the Nordstrom shopper across the Metroplex. 0 o ® �° e a .0 ° A a aG " o demographic profile to reach a Nordstrom _ — d m b ®t ^k L1" i s wow ° � w C n ° store.®� ° rad flo96o�a 4oA 4.101 Pw` .. FMS F' n,�.r I. aaaa1ie xir n _ i b o a p °a .°o - !�15°m neA o m3 p •' >° AY.- r•a..a°.. © °wdn �O b 61 O 4 C .ir°p6)'i Oa O© �C=i) tui p a °' © op OQ_ 'o•©aab ° ,o , ar p ° pppp ¢r ® m@�'"°° C Q Nie- �a nn�°"�'e° o. oen 0 o aUl 6d p®a ° o.rl.v rw4[m G+ 2. An Arlington location would """`� ° b ',°° ° °Q c o o-� ab �o ° [7 ° e- ` o ao °d 9 ®ci. @ Mleyvy 4 g fi aw ° ,,C� ' provide significantly improved w ®©� 9 ° ° o oa®tee o©®° ooQ ° ' ® °� $© ° ° O o an"w° a b °wutuusdp�s ° e a, r access to a Nordstrom store for p o I� f 1^ a a aanasi°�e° Q�G.'�` �ob�a° �a'' °a••o a' p • °+4k affluent households residing in the ° x: p�a"r ° southern half of the Metroplex. F J r •prem Cix ix - ap, •'. h°nt' b.. � .°- p°� s,„r,.". 4 •aY6., p aIr . 54 f a p a ®a Ma'9 � °c " 1 • b. - ^ d °'� � �e ;Fon ate, An�� ° . a ° • �' *r=» � a _ a "°' n ° 1.. ob_r� ' ^� �q (wvp Arlinglan -ice°., Usk C@ift • k a TY- , Q° p w a ' .. . ® R 4• L`cda, a gr tae Grgi..e SVin �� ._° o• ° o` Most Strategic Location 0 o. m a cet w4+ dm £lON.ii�[' 136 Y w4+ dm £lON.ii�[' 136 Appendix B - Nordstrom Store Location Analysis Future Nordstrom Store Location Analysis The Parks at Arlington Mall — A Strong Candidate for the Next Nordstrom Store P rk t o I' to Mall " I t d ar to PiVl�'ULVEL®PIAENT STRATEGISTS _ a s a r mg n is oca a ne _ � •-- - t ?, the center of the area identified as having strong potential for a future Nordstrom 1►' a } • store. r. �w •`= _ - M - _..� * .. - • 7. Fes. - , y`<5► s, �° - v _.- � � � � � :rn :4% .s. �� "''�•�` ;��"1�'--ate'-, �•'1--� 137 Appendix B - Nordstrom Store Location Analysis L)LVLL©PMLNT STRATLGISTS Future Nordstrom Store Location Analysis The Most Strategic Location for a Nordstrom Store (Once an Arlington Store is Operational) a If a new Nordstrom location were built on the south side to provide �C -�0 • a a Q a a o �� C00 • ° o°� ° fl E�', better access for Nordstrom's target market, then the new most �4 40 '6P.G s r a o %0. Then b€) m fl o_oa• 4 " - p p strategic location would be west of Fort Worth. _ o m 4 O p mam o°° tr ® ra 4 An additional highly strategic location would be in the Grapevine Lake ° ,�j�" ° °Q $0 © o cam o 4 ° region, including Sout,hlake. g v o 0 0 o m •- °re© C r ®oe E h r�wrnipg C 4 4� r, o p• ooa c� O o Ori Won- .Or® °O 450 8rshlMO.. ie t A Briar a.l—Ce Al n _ tc^nO y4 OO O I5°r50o OOQO 4 moG P o 6 Oka I ° � °xar✓et ®o ° ® � :.. � is © 0 13m � m p ° ®o � map©� ®®°, M a° Q,' rS � .' — y„Fe°en Aclr� ,, o� .C�f�OIIiQl9 � °, • ° ° :� ��' � �� o a© � ��°® ® aarQ+D• ��°.aad °dJ�fmao°o•� ° °°44m _ ®A. oo �I,6}} O °off" 4a 6°r�t�Jlp�loir r�1°orr ° ° �m pe'' fl : ICr ®m Rtl4k4, a Far br5 p oo ° t o O 00 p ° zoo 8 rmarQ °° BrerKk o . - A ! ° �g favk -r ..e8wjdnrrullrl• m $ o © 0 ®° �, d ° ° ° ° a 4 p , .. °Gal land - _ e .>i' i e: aT p _ ... b 0� p T, ao m rick sl} ©pm pdtsFrE Worh V '{ r 0 0 e 90€IOYVIIICO 0 Ai a•o a°. oa 4 n me° bno©�on°nQ°�ob a, la- p1"IJr. f4okHfity4.so wY!'' + P ° •l.O.. ; a� • '8P-,'�0 •� C°•ra'er: I�"@ n! 1�1 ' • • •: • O m• - • ° o•Q 4^ 0® °° 0 Hnril°y° m ° ip 4fe �e9 o o o m o o O °�•tt+ Dallrs i©s e°12> �$ Q©O© °e g O o© ° +r`y9-qn� •* .4. +� . :rS9N WsaC_te oAa© o �y6 r -. e Eatess ea b ryraael'8 a 4 °Q m y 4Nfir t � � .� -+-.,. � ` r NYS ` _ o • � ara � . ,.. Vi 11 a :DT Po nrrncV ° a ld6 , rA t • dr ° in1{f1Q'I ° � 16r o Me9mm Ci. rtt aa, ° 4° .. n _®- r ty ° d r +;• . l,..' , - w . _ _ r' gyoaho ° 4 . . ° s west flAllas /� S E ° b m° ar6rgw®° ^ -. 4.4� E ° ° •r © I5'I < 0 0. °(? °• 4 j., a, —To. L8ndrYtf92 Dv€[ 1�gtth . yTr�alaldrr'F•rr a irmrrnd,y.'Fry�- ° 1.. r4� S, m• O -`,t •• °4 • ° J '° X' tis °• 6 1-i1 Ariing[on la° j ° Oa'SrC[iH ,� K ,Ffl', BaIcF• ?y� .. • A ® 4 • o , .. rmir leke,: o- ° Cedar Crest _; o sprin s o �J`f:t1Y1�:1fflfd�r.Jfjr�e:.t;ln fl Most^ y - tAfi1in91onStrategic- - � a o o ° � i� J � -d r f r 1 �'�• •..Motrnkairr Creek •{{ ;ry � �. �� 40 4.4 4 X40 rt o ° pLakePalk o • °o- }4 �� F O Location o ©, m �a ° o r, r , 342 Existing Nordstrom Store - � � 4' 0 0 6 © a r ° 9 a . • o o �u�cenv�le •, ,• " Kennedal¢ e31 rLtr ® ��qQ- ° „ ,a New Arlington Location IBr ° s 0 .•,-_ • � ter CD4 � ,s [�+ �7 . r ° b ° ...__ 9 ° ° 4 es he�PBgb�+ Gadder Nrll o m�O � r ,° � r 138 Appendix B - Nordstrom Store Location Analysis Future Nordstrom Store Location Analysis Future Nordstrom Store Trade Areas (Once an Arlington Store is Operational) 00 J o Trade Areas were identified for each of the Nordstrom locations,oe� o 0 o " • • � +� including the new potential store on the south side in Arlington. As r) o •, • F the map illustrates, the new south side store would serve a significant D ��C p o © '♦ • market area with a high density of target shoppers. . 0 0 Southlake would be located near to the periphery of the Northeast �0o0 ® ` • Mall Trade Area, indicating the potential opportunity to be the center 0 (� Ck; O' 6, o •' ., �oF� .� of a new Trade Area. c U -8MA , C Ledr I. :.� • o O� . , ® • • C. nlli F pvl, 0 20 o CP O • o r Gr, O 0a at} {� a n p �1. 7< (^I ;7 .- °� �o O ° ••r.�y' t5 JOE °Q°G O . J -o Ao Y4o0?:�:C1y;R�p U `¢! ° • � �" •sea�'®iao°am f o♦ �®«yu�a;me)am°s_+a�c�eq�O:( p• C°•y © Gt�nrq�na• j;�,p",,,C�..JO' U[na3 e� �y ~"•ram�,5u❑,.''. ay�pQ4' qQO.4o.. 3� -�yar� dx � Q °^ °C��gLLL'qOe1ctlrkwa �F.,g0�s��00 C)'20&��0 000 0-0 r 0 O °° p0 . !10vv1'y0a� 4° Co �A D•�•Iqn�w°O t,:f•q• w 0 -: .e.1 nR i��as �C it 0*0 o v� .r . 4. "}� p� �'C�k ,.i� a �T S ■ a•� °w,. ° F"�` o o °3 4'T . • • • V, h • • • • r • 'Ed M, DLVLL©PMLNT STRATLGISTS 4 � r • E_� ° O 0 0 • i �° ap d� 0 o a ° 6100 o O 4 &J a d� 0 �I a ,o 0 a .°• �,{ O° 0 too ` 07°6Qa 0 C. Appendix B - Nordstrom Store Location Analysis Future Nordstrom Store Location Analysis Identification of Best Location in the Grapevine Lake Area Nordstrom seeks out locations that are zoned for large-scale commercial uses, have complementary land uses and that have excellent highway frontage and easy access to and from the regional highway system. An analysis of land with excellent highway visibility (identified by the yellow zones illustrated on the map) and an exploration of suitable commercial lands along these corridors identified two potential locations near to the hot spot: Southlake Town Square and Grapevine Mills. Grapevine Mills is a super regional draw but has a value - orientated positioning that is not currently well suited to Nordstrom's profile. The Shops at Highland Village is directly within the hot spot, however the project is not located along a regional highway. Southlake Town Square has a tenant line-up and shopper base that is well-suited to Nordstrom's profile. Therefore, it is a strong candidate in the northwest quadrant for a new Nordstrom store. Grapevine Mills Southlake Town Square 'Ed M, DLVLL©PMLNT STRATLGISTS a' iW_ ra,rr..r. nri - o I he LA679 at F My,+�w.r iii. .v - 'L idaemttcerga Frs Carroillon Appendix B - Nordstrom Store Location Analysis Future Nordstrom Store Financial Analysis Southlake Town Square Potential Productivity "Lift" As displayed on the previous pages, thinking from the viewpoint of Nordstrom itself, the most strategic locations for the next two Nordstrom stores are in the south and southwest quadrants of the Metroplex. However, the City of Southlake and the Grapevine Lake area are within a strategic location once a store is located in south Arlington. Southlake Town Square would be the most likely location for a Nordstrom in Southlake due to its strong tenant mix and proximity to highway access. Using metrics from sources such as Nordstrom, Forbes, JCDecaux and employing industry average variables, Southlake Town Square could expect to see an estimated 6.35% lift in average rents if a Nordstrom was to locate in the project. At the current DFW Metroplex Retail Capitalization Rate of 7%, the total value amount of Nordstrom entering the Southlake market is $26.7 million dollars. Nordstrom Sales Per Square Foot Nordstrom Average Store Size (Sq Ft) Nordstrom Average Spend Per Visit Nordstrom Total Sales Est. Nordstrom Visitors a Year Est. % Cross -shoppers Total Cross -shoppers Avg. Cross -shop Expenditure (Non DS) Total Cross -shop Expenditure Avg. Rent as % of Sales Est. Rental Income "Lift" Est. Mall Tenant Rent PSF (NNN) Est. Mall Size (Non -DS) SF Est. Mall Tenant (Non -DS) Rent Est. Lift in Rent Retail Cap Rate Total Value Amount of Retail Store Entering Market '%� Ar i�71001%6 'Papa M,-,O� DEVELOPMENT STRATLGISTS 141 mm,.-O� DEVELOPMENT STRATEGISTS 142 Tenant Void Analysis DEVELOPMENT STRATEGISTS TENANT VOID ANALYSIS MXD conducted a retail tenant void analysis that analyzed popular retailers in the DFW Metroplex, to understand which tenants are not currently located in Southlake, but could locate in the future. Retail centers include NorthPark Center, The Galleria, NorthEast Mall, Shops at Willow Bend, Highland Park Village, and Shops at Highland Village. DFW .. Bath & Body Works Beauty & Cosmetics 14 1 Kiehl's Beauty & Cosmetics 12 0 L'Occitane Beauty & Cosmetics 5 1 Sephora Beauty & Cosmetics 8 1 Barnes & Noble Books & Multi-Media 15 1 Aeropostale Clothing Stores 13 1 American Apparel Clothing Stores 2 0 American Eagle Outfitters Clothing Stores 16 0 Ann Taylor Clothing Stores 7 1 Anthropologie Clothing Stores 6 1 Banana Republic Clothing Stores 12 1 Brooks Brothers Clothing Stores 5 1 Buckle Clothing Stores 5 1 Burberry Clothing Stores 1 0 Cache Clothing Stores 5 1 Carter's Clothing Stores 16 1 Charlotte Russe Clothing Stores 14 0 Charming Charlie Clothing Stores 14 1 Chico's Clothing Stores 18 1 Claire's Clothing Stores 36 1 Club Monaco Clothing Stores 2 0 Coach Clothing Stores 9 1 Coldwater Creek Clothing Stores 11 2 Cole Hann Clothing Stores 4 0 Delia's Clothing Stores 5 1 Dior Clothing Stores 2 p ,3 0 �V Tenant Void Analysis DEVELOPMENT STRATEGISTS TENANT VOID ANALYSIS (page 2) RM •.kFu, aletroplex Dressbarn Clothing Stores 16 1 Escada Clothing Stores 1 0 Everything But Water Clothing Stores 6 1 Express Clothing Stores 15 0 Finish Line Clothing Stores 14 0 Forever 21 Clothing Stores 12 0 Fossil Clothing Stores 7 1 Gap Clothing Stores 23 1 Gucci Clothing Stores 1 0 GUESS Clothing Stores 7 0 Gymboree Clothing Stores 10 1 H&M Clothing Stores 5 0 Hermes Clothing Stores 1 0 Hollister Clothing Stores 12 0 Janie & Jack Clothing Stores 6 1 Jimmy Choo Clothing Stores 1 0 Jos. A. Bank Clothing Stores 10 1 Justice Clothing Stores 27 1 Kenneth Cole Clothing Stores 5 0 Lacoste Clothing Stores 3 0 Loft/Ann Taylor Clothing Stores 18 2 Lucky Brand Jeans Clothing Stores 7 1 Lululemon Athletica Clothing Stores 6 1 Micheal Kors Clothing Stores 8 1 New York and Company Clothing Stores 13 1 Nike Clothing Stores 3 0 RM Tenant Void Analysis TENANT VOID ANALYSIS (page 3) Old Navy Ralph Lauren Rue21 Saint Laurent Soma Intimates St. John Stella McCartney Steve Madden Stride Rite Sunglass Hut Talbots The Children's Place The Limited Tommy Bahamma Tony Burch Victoria's Secret Wet Seal White House/Black Market Windsor Zumiez Dillard's J.C. Penny Khols Macy's Neiman Markus Nordstrom/Nordstrom Rack Clothing Stores Clothing Stores Clothing Stores Clothing Stores Clothing Stores Clothing Stores Clothing Stores Clothing Stores Clothing Stores Clothing Stores Clothing Stores Clothing Stores Clothing Stores Clothing Stores Clothing Stores Clothing Stores Clothing Stores Clothing Stores Clothing Stores Clothing Stores Department Stores Department Stores Department Stores Department Stores Department Stores Department Stores 13 2 21 1 10 3 1 3 11 15 5 20 8 3 2 17 10 12 5 15 14 12 26 10 9 8 1 0 0 0 1 0 0 0 1 1 1 0 0 0 0 1 0 1 0 0 0 0 1 0 0 1 M Emq%%, DEVELOPMENT STRATEGISTS 14, 5 �V Tenant Void Analysis DEVELOPMENT STRATEGISTS TENANT VOID ANALYSIS (page 4) 146 .. • . a � 2"TArArg.. rj-�T.Mgaw T.J. Maxx Department Stores 14 1 Costco Gen. Merchandiers/Waterhouse Clubs 5 1 Target Gen. Merchandiers/Waterhouse Clubs 44 0 Central Market Grocery Stores 5 1 Trader Joes Grocery Stores 5 1 Whole Foods Market Grocery Stores 5 0 Apple Home Electronics & Appliances 5 1 Best Buy Home Electronics & Appliances 20 0 Gamestop Home Electronics & Appliances 104 1 Radioshack Home Electronics & Appliances 83 1 Bed Bath & Beyond Home Furnishing & Accessories 20 1 Crate&Barrel Home Furnishing & Accessories 3 0 Home Depot Home Furnishing & Accessories 50 1 Lowes Home Furnishing & Accessories 25 1 Pier 1 Imports Home Furnishing & Accessories 16 1 Pottery Barn Home Furnishing & Accessories 5 1 Restoration Hardware Home Furnishing & Accessories 2 0 The Countainer Store Home Furnishing & Accessories 7 1 Williams -Sonoma Home Furnishing & Accessories 5 1 Aldo Shoe Stores 8 0 Designer Shoe Warehouse Shoe Stores 14 1 Famous Footware Shoe Stores 31 1 Foot Locker Shoe Stores 14 0 Brookstone Specialty Retail 6 0 James Avery Specialty Retail 12 1 Micheals Specialty Retail 25 1 146 Tenant Void Analysis TENANT VOID ANALYSIS (page 5) Pandora Papyrus Swatch Tiffany & Co. Champs Sports Dick's Sporting Goods Toys R Us/Babies R Us 1 1 0 0 0 0 1 'Papa M, DEVELOPMENT STRATLGISTS 147 - Specialty Retail 17 Specialty Retail 4 Specialty Retail 1 Specialty Retail 2 Sporting Goods & Outdoor Recreation 12 Sporting Goods & Outdoor Recreation 9 Toys & Hobbies 17 1 1 0 0 0 0 1 'Papa M, DEVELOPMENT STRATLGISTS 147